A productive workforce is essential to the success of any organisation. Employers rely on employees performing effectively in their roles, but from time-to-time performance concerns arise. Handling underperformance requires a careful balance between supporting the employee and protecting the organisation.
Capability is a potentially fair reason for dismissal under Employment Rights Act 1996. However, for eligible employees (those who have more than two year’s service or, from January 2027, more than six month’s service), the employer must still be able to demonstrate that it acted fairly and reasonably in all the circumstances in dismissing.
Top 10 tips
Here are ten practical tips for employers dealing with performance issues.
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Set clear expectations from the start
Effective performance management begins with clarity. Employees should understand what is expected of them in their role, including the standards they must meet. Job descriptions, induction training, and regular appraisals are important tools for communicating these expectations.
Without clear benchmarks, it becomes difficult to demonstrate that an employee has failed to meet the required standard.
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Address issues early
Performance concerns should be raised promptly rather than allowed to develop over time. Early conversations can often resolve issues before they escalate into formal processes and help employees understand that their performance needs to improve.
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Investigate the cause of poor performance
If an employee’s performance suddenly deteriorates, it is sensible to explore whether there are underlying reasons before taking formal action. Factors such as ill health, personal circumstances, caring responsibilities, workplace conflict, or bullying may be affecting their ability to perform.
Employers who take time to understand these issues are often better placed to resolve performance concerns constructively.
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Consider whether disability may be a factor
Where an employee is disabled, or may be disabled, employers must consider their duty to make reasonable adjustments under the Equality Act 2010. This duty can extend to adjusting performance expectations, providing additional support, or modifying the performance management process itself.
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Follow a fair and structured process
If informal discussions do not resolve the issue, a structured performance management process may be necessary. Employers should ensure that the process is fair and reasonable, particularly if it could ultimately lead to dismissal.
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Use a performance improvement plan (PIP)
Formal capability processes often involve implementing a performance improvement plan. This should clearly outline:
- The areas requiring improvement
- Measurable performance targets
- The timeframe for improvement
- The training or support available
Regular review meetings should take place so the employee has a fair opportunity to improve.
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Provide support and training
Employers should demonstrate that they have taken reasonable steps to help the employee improve. This might include additional training, mentoring, clearer guidance, or adjustments to workload.
Tribunals often look closely at the level of support offered when determining whether an employer acted reasonably. In Steelprint v Haynes the employer’s failure to offer appropriate support or training meant that the dismissal was unfair. The employee was dismissed for poor performance after failing to meet standards of typing efficiency following the introduction of new computer systems, an aspect of her job which was new to her and for which she received no training.
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Follow a staged warning process
Typically, capability procedures involve escalating warnings if performance does not improve. Acas guidance suggests issuing at least two formal warnings before moving to dismissal for poor performance.
Documenting each stage carefully helps demonstrate that the employer has acted fairly and given the employee sufficient opportunity to improve.
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Remember the right to be accompanied
Employees have a statutory right to be accompanied by a colleague or trade union representative at formal meetings that could result in disciplinary action or dismissal. Employers should ensure that this right is respected during capability meetings.
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Follow the Acas Code of Practice
Where poor performance ultimately leads to dismissal, employers should ensure that the process aligns with the Acas Code of Practice on Disciplinary and Grievance Procedures.
Employment tribunals can increase compensation by up to 25% where an employer has unreasonably failed to follow the Code.
Summary
Managing underperformance is rarely straightforward and requires a balanced approach that combines clear expectations, early intervention, and a fair, well-documented process. For HR professionals, the key is ensuring that managers address issues promptly while also providing employees with appropriate support, training, and a genuine opportunity to improve. By following a structured capability process, considering potential legal obligations such as reasonable adjustments, and aligning procedures with the Acas Code of Practice, organisations can both support employee development and reduce the risk of unfair dismissal claims.
Members of the HR Inner Circle can download our template PIP and suite of letters for dealing with performance management meetings, here: https://members.hrinnercircle.co.uk/the-vault/templates/