Introduction to this document

Letter to employee on retirement

When an employee is about to retire, it’s good practice to formally convey your best wishes for their retirement and at the same time you can deal with any outstanding matters.

A fast-approaching retirement date

When an employee formally notifies you of their intended retirement date, such as by using our Retirement Form, you can reply to them using our Response to Retirement Notification. That letter acknowledges receipt of their retirement notice and arranges a meeting to discuss the retirement arrangements, such as succession planning and handover arrangements. As the employee’s retirement date then edges closer, it’s worth writing to them again about a week or so before their actual retirement date and this is what our Letter to Employee on Retirement is for.

A fond farewell

Our letter starts by thanking the employee for all their hard work during their employment and wishes them the best for their retirement. A simple step such as this can help ensure the employee’s employment ends on a positive note. If the employee has worked for you for several years, you might also want to arrange an informal retirement celebration for them, to which you would normally invite their work colleagues and perhaps also a couple of clients/customers with whom they had a close working relationship. First make sure though that the employee agrees to this; it’s best not to spring it on them as a surprise, as some people prefer to retire quietly.

Outstanding matters

Our letter then goes on to deal with a few outstanding matters. Firstly, it confirms that you’ll continue to pay the employee their salary and benefits until their retirement date, and that you’ll also pay them a sum in lieu of any accrued but untaken annual leave entitlement. Conversely, if they’ve taken too much annual leave, it reserves the right to deduct a sum in respect of this overtaken leave from their final salary payment. If you do intend to do this, check there’s a clawback clause in the employee’s employment contract which enables a deduction to be made from their wages to cover overtaken annual leave, as you can’t make a deduction without it. Secondly, our letter directs the employee to the appropriate person for information about their pension scheme entitlements if they’ve not already progressed that side of things – but don’t ever attempt to give any financial advice to the employee about pensions and instead encourage them to seek independent financial advice. Thirdly, it asks the employee to make arrangements with their line manager to return any company property before their retirement date. This might include, for example, office keys, a security pass, a mobile phone, a laptop and even a company car. It can also include books, reports and other hard and soft copy documents which relate to the affairs of the business. Finally, it says that you’ll arrange to send on their P45, which you would normally do once they’ve left. You must still give a P45 to a retiring employee, as they will need to give it to their pension provider to ensure they’re not charged too much tax on their pension payments.