The Cost of Getting Employee Departures Wrong: Five Common Pitfalls for Bermuda Employers

1. Treating Termination as a Single Event Rather Than a Managed Process

Many employers focus on the termination meeting itself. Although that meeting is significant, the outcome of a termination often depends on what happened in the weeks or months beforehand. Performance concerns that were never documented, inconsistent feedback, and the absence of any clear expectations can make it difficult to justify a termination decision later. Even where an employer has legitimate concerns, the lack of a documented process may increase the likelihood of a dispute.  Employers should ensure that performance issues are identified early, expectations are clearly communicated, and key discussions are appropriately documented.

A well-managed termination process typically begins long before any final decision is made. Regular performance reviews, constructive feedback and opportunities for improvement can demonstrate that the employer acted reasonably and fairly.

2. Assuming Termination is Governed Solely by the Employment Contract

Employment contracts are important, but they are only part of the picture. Bermuda employers must also consider statutory obligations, company policies, benefit arrangements and any incentive compensation plans that may apply. Obligations with respect to notice entitlements, accrued vacation, bonuses, commissions, pension contributions and health insurance coverage may be broader than managers initially expect. Before communicating a termination decision, employers should take the time to identify all contractual, statutory and policy-based obligations that may be triggered by the employee’s departure.

Employee handbooks can play a significant role in managing terminations and should not be overlooked. Handbooks often contain policies relating to performance management, disciplinary procedures, workplace conduct, leave entitlements, and other employment matters that may become relevant as the employee departs. Where handbook provisions have been communicated and applied consistently, they may help to demonstrate that the employer followed a fair and transparent dismissal process. Conversely, failing to follow established policies may create unnecessary risks and lead to questions about the fairness of the termination. Employers should therefore review the employee handbook alongside employment contracts and other relevant documents when assessing termination obligations.

3. Overlooking the Risks Associated with Senior Employees

The departure of senior executives often presents risks that go beyond employment law. Key considerations may include client relationships, confidential information, regulatory responsibilities, incentive awards, succession planning, and communications with staff and stakeholders. Restrictive covenants may also be critical, particularly where the employee has access to sensitive commercial information or significant client relationships. A poorly managed executive departure can create uncertainty both within and outside the organization, making advance planning essential.

4. Failing to Consider Whether a Negotiated Exit Is the Better Option

Not every employment relationship ends smoothly. Settlement agreements can provide certainty, resolve disputes efficiently, and help to preserve professional relationships. They also offer an opportunity to address matters such as confidentiality, restrictive covenants, references and post-employment cooperation.

A negotiated exit can also reduce the time and resources required to manage a contentious situation. Rather than focusing on conflict, both parties may be able to reach a practical solution that provides clarity and allows them to move forward. Evaluating this option early can help employers to avoid unnecessary legal costs and operational distractions.

A significant advantage of a negotiated settlement is a release of claims. Releases provide certainty and finality by addressing potential legal claims arising from the employment relationship. When appropriately drafted and supported by adequate consideration, a release can be a vital component of a settlement strategy.

5. Forgetting the Impact on Remaining Employees

Employee departures do not happen in isolation. How an organization handles difficult exists sends a message to the rest of the workforce. A process perceived as inconsistent, unfair, or poorly communicated can undermine trust and engagement. By contrast, a professional and respectful approach can strengthen workplace culture, even when difficult decisions are necessary. Business leaders should remember that employee departures are not just legal events – they are leadership opportunities.

Looking Ahead

As Bermuda’s employment landscape evolves, employers face growing expectations around governance, documentation, workplace culture, and risk management. Employee departures remain among the most sensitive aspects of the employment relationship, and mistakes can be expensive. Fortunately, many common issues are preventable. By planning ahead, seeking advice when needed, and approaching departures strategically rather than reactively, employers can reduce risk while protecting both their business and reputation.

First Published in the Bermuda Chamber of Commerce Newsletter (Chamber Insider), June 2026