4 Risks That Small Businesses Face When They Terminate Employees

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There could be a wide range of factors that can force a business to terminate employees. A layoff could be a result of disciplinary action, poor employee performance, managing operating cost and low demand situation. But termination of permanent employees can pose lot of negative consequences for the organizations, especially if it is a small company.

Today Ms Kanika Kohli, Vice President of Northern India’s number one manpower outsourcing company Trendsetters Facilities & Technical Services (TFTS, shares five vital risks that small companies in India can face when they terminate permanent employees.

1. Being sued by the employee

Labour law is complex in India and if legal matters are not handled properly (or even if handled) properly during the termination process. Companies are always at risk of being sued by the terminated employee, who can come up with a lot of false allegation and demand high compensations. These matters generally get effectively handled by big companies who maintain dedicated corporate lawyers on the payroll. For small companies, there is no such judicial expert on-board. Hence they generally end up making lot of loss both in terms of money and time.

2. Loss of company property and trade secrets

If firing is not done with due diligence, companies can be at risk of losing company property and files. Prior terminating, companies should plan to ensure that the fired employee does not have access to crucial company property, confidential information, and files. If the fired employee does not return the company property such as cell phone, credit card, computer, keys, passwords, etc., the company may end up losing that property.

3. Destruction of company reputation

A lot of time terminated can decide to take revenge, and to do so they can brand the company negatively and give it a damaging public image via social media. These actions generally affect small and middle size companies more than big ones – as acquiring good talents are more of a challenge for small companies as compare to big ones. Additionally, the terminated employee can secretly disclose confidential information or trade secrets to the competitors, thus giving them a competitive advantage over the business.

4. Poor performance and retaliation by other employees

It is normal for the remaining employees in the company to feel threatened about their job security whenever they see a colleague terminated. In many cases, employee termination creates tension within the company because other employees feel like they may be the next “victim”. In the worst scenario, some employees may be affected psychologically and others may resign willingly when they cannot manage the pressure. Therefore, firing one employee may affect others causing retaliation and poor performance.


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