I was sitting with a client a couple of weeks ago discussing their current accounting and finance staffing needs. The person I was meeting with shared with me that the current CFO has been with the organization for over twenty years. Started as a junior accountant, progressed throughout the years, and when the CFO resigned, they believed he was the perfect replacement. They continued to share with me that unfortunately it is not working out as they believed it would and that in this role his performance and skill set does not meet their needs, yet, they are holding back from letting him go. “What are the reasons that you are holding back?” I asked. The response was not surprising to me, as I have heard it many times before. From a humanitarian prospective they feel terrible, “he is a loyal employee, has been with the organization for a long time, how we can let him go now? Besides, what kind of an affect will it have on the rest of the Finance team”? From a business prospective they claim “it will be too expensive” because according to The Employment Standards Act without a written notice of termination he must be given termination pay in a lump sum equal to the regular wages plus vacation pay and benefits, he has been with us for over 20 years and therefore, he would be entitled to a minimum of $50,000 + benefits”.
So, yes, on the surface it is a large sum of money to fork out at one time. Think about it though…….is it really? The dictionary defines expensive as “costing a lot of money”. By keeping an employee that is lacking the full knowledge and skill set to do their job is costing your organization a lot more than the actual one time amount that is required to be paid upon termination. You will continue to incur direct and indirect costs such as:
- The base salary + 4% vacation pay, + benefits, that is costing you money
- Because they are under performing in their present job, that is costing you money
- They know that they are under performing, so, no doubt they are frustrated and stressful, that is costing you money
- The efficiency and effectiveness of the whole team is not up to par, that is costing you money
- The team recognizes that their boss is not performing up to par, and are most likely looking at other places of employment, that is costing you money
- Additional external monthly and annual help from your CA firm or auditors, that is costing you money
- Hiring contractors through an employment agency to ensure all reporting is completed on time and accurately, that is costing you money
Bottom Line: No doubt it is painful, no one likes to be the “bad” person letting someone go and terminating their livelihood. Once you recognize though, that an employee is not performing to your standards or is lacking the full skill set to complete their work, you do not have the luxury of keeping them on your payroll, because keeping them on your payroll IS EXPENSIVE!
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