ONE OF THE unpleasant realities of running a business is that occasionally an employee does not work out because of incompatibility, performance, or any number of other issues.

Firing an employee is never easy. An attorney or an employee-relations specialist can offer suggestions on how to handle the termination and protect a business from the possibility of a wrongful termination lawsuit.

Preparation is key when firing someone, and careful planning can limit misunderstandings, anger, and recrimination. Documentation needs to be in order before the meeting with the employee takes place. Pull together performance appraisals, written warnings, salary information, and all correspondence with that employee, particularly if it's related to job performance. For more on this topic, read Taking Precautions Before Firing an Employee of Your Small Business.

If an employee will receive additional consideration, such as severance, medical coverage, additional vacation days, or other perks, have an attorney draft a waiver for the employee to sign. Be sure to include all termination benefits to which the employee is entitled. Make the employee's receipt of the consideration dependent on his or her agreement not to sue.

Prepare to collect everything the company has provided to the employee, and consider which computer passwords, access codes, and permissions must be changed.

Have a witness, preferably your Human Resources manager, observe the proceedings. Should the former employee decide to sue, this witness can corroborate the events of the meeting.

At the beginning of the meeting, explain to the employee why he or she is being terminated. Be firm but courteous while outlining the reasons as succinctly as possible. Make sure the employee fully understands why he or she is being fired and not merely reprimanded.

Try to limit explanations and discussion about the termination, and don't apologize for taking this action. Let the employee express his or her feelings. Give honest answers but avoid debating the issues. Explain the conditions of the termination, such as the severance package and any benefits or outplacement services offered. Have the employee sign all related paperwork, including any appropriate waivers or agreements.

Tell the employee how long he or she has to gather their belongings and leave the premises. Try to conclude the meeting with a handshake and a sincere wish that the employee do well in the future. If possible, try to arrange for a quick and graceful exit. Monitor the departure, but don't escort the employee off the premises unless he or she has been terminated for committing a criminal act or has made threats. For more on handling the termination of an employee, read Setting the Proper Tone for a Termination Meeting.

After the meeting, review the terminated employee's job description as well as policies on warnings and dismissals. Would a different job description have made for a better match? Should you modify the warning system or alter the company's termination policy and procedures for a smoother transition? Answering these questions may eliminate the need to fire someone in the future.

Keep details about the employee's termination confidential to maintain their privacy. It is important, however, to reassure your remaining employees that their jobs are not in jeopardy. Let them know that the employee has left the company. It's also important to act quickly to get the terminated employee's work reassigned and a job opening posted, if necessary.

Get more Employee Termination tips on subjects like Downsizing, and creating a severance package on AllBusiness.com. AllBusiness.com provides resources to help small and growing businesses start, manage, finance and expand their business. Copyright © 1999 - 2007 AllBusiness.com, Inc. All Rights Reserved.