What To Do When an Employee Leaves: a Step-by-Step Guide

You’ve probably been reading that employees are resigning in droves in the United States. According to the Labor Department, 3.4 million people quit their jobs in January 2024. Even though the Great Resignation has ended, in many industries, resignations are still occurring in high numbers, so it’s critical to figure out what to do when good employees quit suddenly, and not always for new job offers.

As a business owner, you have to handle resignation logistics and ensure compliance, as well as maintaining operations, uplifting employee morale, and finding a new hire. That’s why it’s important for small businesses to have a process in place. Below, we’re sharing what you need to do when an employee resigns—and how you can prevent resignations from happening in the future. 

Why employees quit

There are different personal and job-related reasons employees quit and many studies on the topic. Across them, here are some of the common themes:

1. Employee compensation: According to a recent LinkedIn survey of more than 1,000 US workers, 85 percent are thinking about leaving their job. Of that number, 36 percent of them are considering that in search of making more money somewhere else. With inflation so high today, it’s not surprising people want better compensation, especially when employers are reducing pay bumps: 3.5 percent for merit increases and 3.9 percent for total salary increase budgets for non-unionized employees for 2024, compared to 3.8 and 4.1 percent, respectively, in 2023, as shown in a Mercer report.
2. Work-life balance: Many employees today are overworked, and want to work to live not live to work. They want space between their work and personal lives, along with greater flexibility in their schedules and workplace. When they don’t get it, they look elsewhere: 27 percent of workers said they would switch jobs this year for better work-life balance, revealed the LinkedIn survey. And a 2023 Pew Research Center survey found that 62 percent of workers highly prioritize paid time off for vacations, routine doctor’s visits, or to deal with minor illnesses.
3. Career growth: Employees want a clear career progression track and professional growth opportunities. In fact, a 2023 FlexJobs survey of 2,600 people currently employed shared that 30 percent want to expand their skill set and 28 percent feel there is a lack of opportunities for advancement in their current profession.
4. Recognition: Employees who don’t feel recognized or appreciated for their efforts and skills are more likely to search for a new role elsewhere. The FlexJobs survey also found that 26 percent of workers feel undervalued or disrespected.

What to do when employees quit

Knowing where to begin when an employee becomes a former employee without notice can be hard. But, there’s a step-by-step process you can follow for employee resignations. Here’s what you need to do:

Step 1: Get clarification

The first step to take before an employee exits the company is to have a conversation with them. Instead of getting angry (or panicking), get curious. Start by asking the employee why they’re leaving. 

Understanding the reason behind someone wanting to leave is crucial. It gives you valuable information about how to respond. For example, if they’ve found a new opportunity, you may want to make a counteroffer. In any case, you’ll want to evaluate whether changes are needed going forward. 

For example, if one of your best employees tells you they’re leaving because they can’t make their shift times work, you could offer to switch their shifts. More often than not, though, the resigning employee has made up their mind.

Step 2: Coordinate dates and responsibilities 

If you have human resources staff (HR), it’s crucial to direct your employees to HR so they can file a formal resignation. However, if you don’t have an HR person on staff, you’ll need to take the following steps:

• Get a signed and dated resignation letter. Ask your employee to write an official notice of resignation that shares why they’re leaving. Make a copy of this statement.  
• Plan the employee’s departure date. If you require a two-week notice, schedule the employee’s final day and check to make sure that your employee can work the next two weeks. If they can’t—or if you don’t want them to continue working for whatever reason—you’ll need to pick another departure date and get on the same page with your employee. 
• Discuss final responsibilities. If your employee is working for another two to three weeks, make sure you go over their schedule and specific responsibilities for the remainder of the time to ensure a smooth transition with workload. They may need them to close out a certain project, transfer their contacts to a coworker, or train someone else to take over their daily tasks. If your employee is leaving that same day, take the time to gather any information you need from them (like client contacts or project statuses). 
• Schedule an exit interview. Pick a time that works for your employee and ask a neutral party to conduct the interview. 
• Confirm the employee’s personal information. You need an employee’s up-to-date mailing address, personal email address, phone number, and emergency contact information so you can send them their last paycheck, W-2 form, and relevant benefits information. 
• Prepare the employee’s file. You’ll want to include their resignation letter, compensation records, a record of the exit interview, their personal contact information, and any additional documents (like non-disclosure agreements). 

Step 3: Organize the final paycheck and benefits information

Once you’ve figured out when your employee will stop working, it’s time to settle their payment. Start by checking your state’s laws regarding when you need to issue an employee’s final paycheck. Some employment laws dictate that you need to pay an employee within 72 hours of them giving notice, while others require payment by the next regular payday. 

As you’re calculating your employee’s paycheck, make sure you factor in things that can affect the final amount, like unused sick days, accrued paid time off, commissions, and bonuses. If you need help, consider reaching out to your business accountant; they can double-check the math and ensure you’re not making any errors. 

You’ll also need to provide your employee with information about their continuation of health coverage (aka COBRA) and benefits package. They need to know when their health insurance runs out, information about their 401(k) plan, and what to expect in terms of other benefits ending. 

Step 4: Notify other staff and employees

After you square away paycheck logistics with your HR person or accounting expert, let people know about your employee’s departure. Consider telling any key business partners or managers individually, then send a workplace-wide email to everyone else. 

Unless you want to—and the employee gives their consent—you don’t need to share the reason why an employee is leaving. Just keep the message simple and positive. You can say something like, “I wanted to let you all know that Jane Andrews will be working her last day next Friday. We’re grateful for her contributions, and we wish her well on her next endeavor!”

Step 5: Reassign responsibilities 

As soon as everyone knows an employee is leaving, work on reassigning that employee’s shifts or responsibilities. You may need to adjust your monthly shift schedule, move deadlines or project dates, or set up one-on-one chats with certain employees. Some employees may need training to take over another person’s tasks, while others might need a pep talk in the wake of their team members or subordinates leaving. 

Step 6: Make a replacement plan

Even if your employee is staying on for another several weeks, it’s critical to begin thinking about a replacement plan. Promoting or hiring a new employee can take months; starting the process early can help minimize the time gap and lost revenue.

The first step is determining whether you need to replace your departing employee with another full-time worker. If you do, you need to figure out whether you’ll promote a key employee from within or hire externally. Either way, it’s a good idea to review your budget, write an accurate job description, and create and distribute a new job ad in a variety of different places. 

On the other hand, if you think you can get by without backfilling the role, you’ll need to figure out how. It might involve outsourcing tasks to an independent contractor, for example, or redistributing work among several different employees. In any case, it’s helpful to review employee performances and workflows to see what’s feasible. 

Pro tip: If you decide to give employees additional tasks or shuffle their workloads, make sure you’re compensating them fairly and providing them with clear instructions and goals for doing their work. 

Step 7: Conduct an exit interview

An exit interview is one of the most valuable sources of information when an employee leaves. On the day of an employee’s departure, set aside 30 minutes to an hour to discuss their overall work experience and reasons for leaving. If you don’t have a designated HR executive, ask a neutral person to conduct the interview (like the manager of another team), so your employee is comfortable being candid. 

Here are some questions to consider asking:

• Why did you start looking for another job?
• Why are you leaving? 
• Would you ever consider returning to work here? Why or why not?
• Did you feel equipped to do your job here? Why or why not?
• How was your relationship with your manager? 
• What did you think of the work environment or company culture? 
• How valued did you feel working here? 
• Did you ever have concerns about the job or company culture? What were they?
• How do you think your job or role changed over time? 
• What qualities would you consider most important for hiring your replacement? 
• What was your favorite part of your job? Least favorite? 
• Were you given clear instructions and goals to work toward? 
• Did you receive feedback on your job? How often? Was it just during performance reviews or on a regular basis?
• What would you change about your job or workplace? 
• Do you have any suggestions for how we can improve? 

Answers can help better retain your staff and improve the job search for their replacement.

Step 8: Gather the employee’s workplace belongings 

On an employee’s last day, make sure you collect any belongings the business owns, such as an employee laptop, cellphone, equipment or tools, uniform, building keys, ID badge, or employee manual. It’s also important to change any passwords to employee email or work accounts and to remove the employee’s access to any internal digital systems. 

Step 9: Send your employee off with warmth

Depending on your workplace culture and particular business, you may or may not have the time or resources to host a send-off party for every employee who leaves. However, it’s still a good idea to wish the person well. Saying goodbye on a positive note helps you maintain strong relationships—and set an example to your other employees. 

Consider doing something kind for the person leaving, like giving them a handwritten card, restaurant gift card, flowers, or edible treat. Even taking the time to walk your employee out of the workplace on their last day and thank them for their time can go a long way. 

Step 10: Reflect and adjust 

When an employee quits, take time to reflect and review their feedback. Processing an employee’s experience—and considering your own experience working with that person—can give you ideas for how to improve your business practices, employee management, and workplace culture. 

Make a list of immediate and long-term changes you’d like to make, then list the reasons why. For example, maybe you want to update your job descriptions to accurately depict day-to-day work and attract more qualified candidates. Or maybe you extend the training period for employees, so they have more confidence on the job. 

How to improve employee retention

Improving employee retention at your business requires strategy, time, and the willingness to make big changes. The most effective way to reduce employee turnover is to find out what your current employees want—through email surveys or one-on-one check-ins—and then work on implementing their feedback. 

Here are a handful of ways to invest in your employees’ satisfaction at work:

• Offer more flexibility at work, like flexible work hours, choice of shifts, or work-from-home options. 
• Offer a wider variety of benefits, such as covered therapy sessions or monthly wellness stipends. 
• Create a career growth plan with each employee. 
• Train managers to give more recognition and feedback. 
• Invite a diversity, equity, and inclusion expert to evaluate your business practices and pay structure.