How to handle employee resignation in 10 Steps: A guide for small business owners

How to handle employee resignation in 10 Steps: A guide for small business owners

Kim Mercado
By Kim Mercado
May 31, 2022
7 min read

An employee resignation can leave small business owners reeling, especially if they didn’t see it coming. Once you recover from the initial shock, you need a plan to cover their responsibilities and ensure that your remaining staff isn’t overwhelmed.

Use this checklist to guide what to do when an employee quits. It can help you manage the separation and make the transition as painless as possible.

Step 1: Make the resignation formal

Your first order of business after an employee’s resignation is to request a formal letter that includes their final date of employment. Get the resignation letter in writing to protect your business from unemployment claims and other charges of impropriety.

Step 2: Create a transition plan

A smooth transition is key to a successful employee resignation. It’ll make the experience painless for your exiting employee while also easing the burden on your remaining staff and minimizing business disruption. Here’s how to start:

  • Make a list of all responsibilities and tasks that your employee currently handles. 
  • Talk to your employee about projects they’re working on or loose ends that need to be tied up. 
  • Determine if you need to fill the role immediately or if you can split responsibilities between yourself and other staff.

If you’re rehiring, you may not find a replacement before they leave — it takes an average of 23 days to hire a new employee, according to a study by Glassdoor. Your transition plan should include transferring knowledge immediately so your remaining staff can help train the new person.

Step 3: Notify other employees (and customers)

If your employee tells you they are leaving without telling anyone else, ask them when they’d like to make an official announcement. But if it’s someone who works closely with others, they may need to know sooner rather than later. The news will eventually spread, so it’s best to be up-front about the situation. 

If your employee had contact with your customers or vendors, now’s the time to notify them, too. You might say, “Jessica Smith has decided to leave our company. We will work hard over the next few weeks to ensure a smooth transition and minimal disruption of service.” Then, ask if they have any questions or concerns, and resolve them as best you can. 

Step 4: Divvy up responsibilities

Your next step on the “when an employee resigns checklist” is to make sure nothing falls through the cracks during the transition. It’s an excellent opportunity to talk to employees about their roles and responsibilities. 

For example, you might say, “Jessica is leaving, and I want to discuss how that might impact you. Is there something she does that you'd like to learn about or try?" You might find the perfect person for the role already in-house. 

Step 5: Transfer knowledge to other team members

To avoid finding yourself in a lurch when an employee leaves, you'll want to train your remaining staff to transfer knowledge from the departing employee. 

Sit down with the person leaving and let them know you're interested in capturing their knowledge before they go. Here’s how:

  • Verify the daily duties of the soon-to-be departed employee and ask them to make a checklist of projects they’re working on or clients they work with. 
  • Create videos that record a brief walkthrough of processes, shortcuts and solutions — video can be significantly faster and more effective than a written document.
  • Hold training sessions for staff members taking over new roles after the resignation.

Many small business owners struggle to maintain productivity when one of their key employees resigns or gives notice. Transferring knowledge early can ensure a smooth transition for your team and customers.

Step 6: Transition technology

Don’t forget to handle company-owned equipment and access before your employee leaves. Make a plan to disable accounts or transfer passwords, or notify third-parties if you outsource IT help. 

Ask the employee to return company-owned assets — such as laptops, keys and badges — before the employee leaves the building. It's also good practice to review any files on their hard drive and delete anything personal, such as family photos or documents and files.

Step 7: Provide required notices

Federal and state laws may require you to provide certain notices to departing employees. For example, some states require businesses to provide a separation notice for unemployment purposes. It should specify the final date of employment and the reason for the separation.

Depending on how many employees you have and state and federal laws, you may also need to provide information on retirement and health benefits, including continuing health insurance (called COBRA under federal law).

Step 8: Update your workers’ compensation list

After an employee resignation, you must update your workers' compensation list. This may sound like a no-brainer, especially when an employee quits suddenly, but it's a step that often gets overlooked in the frenzy of the moment.

The good news is that updating your workers' compensation list is very simple. All you need to do is notify your insurance company and fill out any forms they may require. For example, at NEXT, you can easily update this yourself through our mobile app or customer portal.

Also, make sure you keep accurate records of employees who quit and their last date of employment. If an injured ex-employee tries to file a workers’ comp claim, you’ll need to be able to prove their employment status at the time of injury. This is where keeping detailed records can really pay off!

Step 9: Schedule an exit interview

When an employee resigns, you might opt to schedule an exit interview with them. Keep in mind that it doesn't have to be an official sit-down meeting. It could be a casual cup of coffee, a lunch or a quick phone call.

Not sure what to say to an employee who is leaving? Start by telling them how much you appreciate their work. Be sure to ask them why they're leaving (if you don’t already know why), what you could have done better as an employer and what you can do to improve the company going forward. You never know when that insight could help you in the future.

Step 10: Hold a team meeting

When an employee leaves, it’s essential to maintain a positive work environment. It’s helpful to communicate with your team after the employee quits. They need to hear that they’re an important part of the team and that you value their work.

Then, let them know what will happen next — whether you plan to hire someone new or if another person on staff will take over the responsibilities. You may also want to tell your team about any changes or initiatives coming up so they’re aware of what’s on the horizon. 

NEXT protects small businesses through transitions

Business insurance from NEXT can help protect your company through periods of transition or the unexpected. We offer general liability, workers compensation, commercial auto, and professional liability (also known as E&O insurance).

Our online application process makes it easy to get a quote and customize your insurance options. With NEXT, you can purchase the coverage you need and print your certificate of insurance in about 10 minutes. 

If you have questions, our U.S.-based insurance professionals are available to help.

Get an instant quote now.

How to handle employee resignation in 10 Steps: A guide for small business owners


kim mercado
About the author
Kim Mercado is a content editor at NEXT's blog, where she writes and edits posts for small business owners. She is an experienced marketing professional and loves helping entrepreneurs solve their business challenges. You can find Kim trying new recipes and cheering the 49ers.
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