A Guide To Managing Poor Performances
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Managing poor performance can be one of the most challenging aspects of running a business. Whether an employee is consistently underperforming, struggling to meet targets, displaying a poor attitude, or failing to meet expected standards, employers must address issues carefully and fairly.
Handled correctly, performance management can help employees improve and enable businesses to maintain productivity and morale. Handled poorly, it can lead to grievances, discrimination claims, constructive dismissal allegations, or unfair dismissal claims.
This guide explains how employers can effectively manage poor performance while minimising legal risks.
On this page:
What is Poor Performance
Poor performance (often referred to as a capability issue) occurs when an employee is unable to perform their role to the required standard.
Examples may include:
- Consistently failing to meet targets or deadlines
- Producing work of an unacceptable quality
- Making repeated mistakes
- Struggling to perform key duties
- Failing to follow procedures correctly
- Demonstrating a lack of required skills or knowledge
It is important to distinguish poor performance from misconduct. Poor performance generally relates to an employee’s ability to do the job, whereas misconduct relates to behaviour and conduct issues.
Poor Performance or Misconduct?
One of the most common challenges for employers is deciding whether an issue is one of capability or conduct.
For example:
Capability Issues
- Lack of skills or training
- Inability to meet required standards
- Genuine difficulty completing tasks
- Reduced performance due to health concerns
Misconduct Issues
- Deliberate refusal to carry out instructions
- Persistent lateness
- Breaches of company policies
- Insubordination
- Wilful poor behaviour
Sometimes the distinction is not straightforward. Employers should investigate the circumstances before deciding which procedure to follow.
Where health conditions, stress, disability or other medical issues may be affecting performance, specialist advice should be sought before proceeding.
Best Practice When Managing Poor Performance
Address Issues Early
Performance concerns should be raised as soon as possible.
Delaying action often allows problems to become more serious and may make it harder to demonstrate that concerns were genuine.
Use Informal Conversations First
In many cases, an informal discussion can resolve performance concerns before a formal process becomes necessary.
Employers should:
- Explain concerns clearly
- Set expectations
- Offer support
- Agree improvement targets
- Monitor progress
Employees should also understand that a formal capability process may follow if improvements are not made.
Keep Accurate Records
Employers should maintain records of:
- Performance reviews
- Appraisals
- Informal discussions
- Meetings
- Emails
- Improvement plans
- Training provided
Good documentation is often critical if a dispute later arises.
Conduct Meaningful Appraisals
Regular appraisals provide an opportunity to:
- Discuss performance concerns
- Set objectives
- Identify training needs
- Monitor progress
Appraisals should be honest and constructive.
Overly positive appraisals that do not reflect genuine concerns can undermine a later performance management process.
Follow Company Policies
Employers should ensure that any capability, performance management or disciplinary procedures are followed consistently.
Failure to follow internal procedures can weaken an employer’s position if a claim arises.
Consider Underlying Causes
Before taking formal action, employers should consider whether poor performance may be linked to:
- Stress
- Mental health concerns
- Disability
- Medical conditions
- Workplace issues
- Lack of training or support
Additional legal obligations may arise where health conditions or disabilities are involved.
Establishing a Performance Gap
A key part of any performance management process is identifying the gap between:
What is expected, and
What the employee is currently delivering.
Employees must understand:
- The standards required
- How those standards are measured
- Where they are falling short
Evidence may include:
- Performance data
- Sales figures
- Error rates
- Customer feedback
- File reviews
- Appraisals
- Work samples
- Attendance records
Vague statements such as “your performance isn’t good enough” are unlikely to be sufficient.
Giving Employees Time to Improve
Employers should provide employees with a reasonable opportunity to improve.
What is reasonable will depend on:
- The nature of the role
- The seriousness of the performance issues
- The employee’s length of service
- Previous performance history
- The size and resources of the organisation
- Any relevant policies or procedures
Improvement periods should be realistic and proportionate to the circumstances.
Using Probation Periods Effectively
Probationary periods provide employers with an opportunity to assess whether a new employee is suitable for the role.
Where concerns arise during probation:
- Expectations should be clearly communicated
- Additional support may be provided
- The probation period may be extended where appropriate
- Employment may be terminated if standards are not met
Employers should always check contractual notice requirements before ending employment.
Formal Capability Procedures
If informal measures do not result in improvement, a formal capability process may be required.
A typical process may involve:
Stage 1 – Formal Capability Meeting
The concerns are explained and performance targets are set.
Stage 2 – Review Period
The employee is given time and support to improve.
Stage 3 – Further Review
Progress is assessed and further action considered.
Stage 4 – Final Capability Meeting
Where insufficient improvement has been achieved, further warnings or dismissal may be considered.
Every situation is different and employers should seek advice before commencing a formal capability process.
Performance management procedures can be lengthy, disruptive and time-consuming.
In some circumstances, employers and employees may agree to end the employment relationship through a settlement agreement.
A settlement agreement is a legally binding agreement under which:
- The employee receives an agreed payment
- The employment ends on agreed terms
- The employee waives certain legal claims
Settlement agreements can provide certainty for both parties but should not be viewed as the default solution to every performance issue.
Common Mistakes Employers Should Avoid
Employers should avoid:
- Ignoring performance concerns
- Failing to document issues
- Conducting superficial appraisals
- Treating capability and misconduct as the same issue
- Bullying, sidelining or pressuring employees to resign
- Failing to investigate underlying medical conditions
- Deviating from company procedures
- Giving inaccurate references
- Dismissing employees without allowing reasonable opportunity to improve
Frequently Asked Questions (FAQs)
Is a poor attitude a performance issue or misconduct?
It depends on the circumstances. A lack of ability or confidence may indicate a capability issue, whereas a deliberate refusal to cooperate or follow instructions may amount to misconduct. Employers should investigate before deciding which process to follow.
How long should I give an employee to improve?
There is no fixed period. Employers should consider the nature of the role, the issues involved, previous performance, length of service and the support required. Improvement periods should be reasonable and proportionate.
What evidence do I need to demonstrate poor performance?
Evidence may include:
- Appraisals
- Performance statistics
- Customer complaints
- Examples of work
- Error rates
- File audits
- Emails and correspondence
- Previous discussions and warnings
The key is demonstrating the gap between expected and actual performance.
What if an employee improves and then their performance deteriorates again?
Employers may consider extending review periods or monitoring arrangements. Any decision should be documented and explained to the employee. Repeated performance issues may justify progressing through a formal capability procedure.
Can I dismiss an employee for poor performance?
Potentially, yes. However, employers should usually follow a fair capability process, provide support and allow a reasonable opportunity for improvement before considering dismissal.
What if poor performance is caused by stress or ill health?
Employers should proceed carefully. Medical conditions, mental health concerns and disabilities may trigger additional legal obligations. Medical evidence and specialist advice may be required.
Can an employee bring a claim if dismissed for poor performance?
Yes. Employees with the relevant qualifying service may be able to bring an unfair dismissal claim if the employer cannot demonstrate a fair reason for dismissal or has failed to follow a fair procedure.
Are settlement agreements a good alternative?
In some situations, settlement agreements can provide a quicker and more commercial solution than a lengthy capability process. However, they should be approached carefully and legal advice should be obtained before starting discussions.
Should I provide a reference for an employee dismissed for poor performance?
There is generally no legal obligation to provide a reference. However, if a reference is given, it must be accurate, fair and not misleading.
When should I seek legal advice?
Employers should seek advice where:
- Dismissal is being considered
- Health issues may be involved
- Discrimination risks exist
- A grievance has been raised
- A settlement agreement is being considered
- The correct procedure is unclear
Early advice can often help avoid costly disputes and tribunal claims later.