Dealing with poor performance: checklist

Caroline Noblet of Squire Sanders Hammonds begins a series of articles on dealing with poor performance with a checklist to help employers deal with poor performance effectively and in a way that is legally compliant.  Employers should address poor performance issues consistently through their disciplinary or performance management procedures, as appropriate. 

1. Establish whether the employee's poor performance is capability or conduct related. 

In the event that an employee's work performance deteriorates, the employer needs to decide whether to follow a performance management process or take disciplinary action. To be able to make this decision, it needs to establish whether the poor performance is capability or conduct related.

Under s.98(3)(a) of the Employment Rights Act 1996, capability relates to an employee's "skill, aptitude, health or any other physical or mental quality". Lack of capability in job performance could arise from, for example, incompetence (where no matter how hard the employees tries, he or she is unable to perform the job to the standards that the employer has set) or it could be due to a training need. Conduct, on the other hand, is related to the way that the employee behaves while he or she carries out his or her job. Misconduct can include a breach of the employer's policies and procedures, an unreasonable refusal to comply with the employer's instructions, laziness and an unwillingness to cooperate.

The main distinction between capability and conduct is that capability is usually outside the employee's control (ie it is not strictly his or her fault), whereas conduct is something over which he or she does have control. It is not always clear whether an employee's poor performance is due to capability or conduct. In some cases it may be a combination of the two. In these circumstances it is usually possible for the employer to proceed with dealing with the poor performance, without being absolutely certain, as this is likely to be clarified in the employee's response when the employer discusses the performance concerns with him or her.

2. Address poor performance through the appropriate procedure.

Where an employee's poor performance can be clearly identified as being due to capability or conduct, it is important that the employer follows the appropriate procedure. Failure to do so could render a subsequent dismissal unfair on procedural grounds. If the employer identifies that the employee's poor performance is capability related, the employer should follow its performance management procedure.

If the employee's poor performance is clearly due to misconduct (for example the employee demonstrates a poor attitude towards the work and in his or her response to attempts by the employer to bring about an improvement), the employer should address this through its disciplinary procedure.

Employers should comply with the Acas code of practice on disciplinary and grievance procedures (PDF format, 1.58MB) (on the Acas website) when dealing with poor performance. Although the code addresses disciplinary and grievance issues, it states that disciplinary situations include poor performance. However, it also says that employers that have to address performance issues can do so under their capability procedure, in which case they must still follow the basic principles of fairness in the code. Although, in general terms, employers should follow the same procedure (for example by allowing the employee to state his or her version of events and giving the right of appeal against formal action) when dealing with poor performance due to misconduct or lack or capability, the tone of the two processes will be very different. The disciplinary procedure is aimed at people who will not perform, whereas a general performance improvement procedure is for people who cannot perform.

A failure to follow the Acas code will not, in itself, make an employer liable for unfair dismissal, but the employment tribunal will take the code, and a failure to follow it, into account when determining the fairness of a dismissal. The tribunal can also adjust awards for unfair dismissal by up to 25% (up or down) if either party unreasonably failed to follow the code.

3. Train managers in how to deal with poor performance issues.

Managers frequently shy away from dealing with performance management issues. For employers to be able to improve their overall performance and productivity, they need to ensure that this does not happen and that managers have the skills and confidence to tackle underperformance head-on. One way of doing this is for employers to make sure that all managers receive training on how to implement the performance management procedure.

4. Deal with poor performance as and when it arises.

It is essential that employers identify and deal with performance management issues at an early stage. If they do not, the employee concerned may believe that the unacceptable level of performance is acceptable. This could result in it being much harder for the employer to deal with the issue. Tackling, and being seen to tackle, performance management issues, sends out a clear message to the wider workforce about the employer's expectations regarding levels of performance. If an employer deals with performance issues at an early stage, this also lays the foundation for subsequent disciplinary and/or dismissal actions and increases the likelihood that, in the event of a claim, the employment tribunal will find the dismissal to be fair.

As a result of the abolition of the default retirement age, employers also need to give careful thought to how they manage the performance of older members of staff whose underperformance may previously have been overlooked as they approached retirement age. To avoid age discrimination claims, employers should deal with poor performance in the same way for all employees, regardless of their age.

5. Keep consistent records of performance levels.

Employers should keep documentation and evidence to support their assertion of an employee's poor performance. It is important that appraisals accurately reflect the employee's performance during the relevant period. Employers should always keep records of the steps that they have taken to manage an underperforming employee, including notes of formal and informal meetings and copies of warnings and targets that they have set. If the matter ends up in an employment tribunal, this documentation will be key in enabling the employer to demonstrate that it carried out a fair procedure and that the employee understood (or ought reasonably to have understood) the employer's expectations of him or her.

6. Carry out appraisals/performance reviews on all staff.

If an employer has no system of regular appraisals or performance reviews for staff, it will be difficult for it to show that an employee is underperforming. If managers have tended to shy away from being honest with employees about their performance during appraisals (perhaps because they do not want to be seen as overcritical or to provoke absenteeism or grievances) this will make it harder for the employer to demonstrate that a subsequent dismissal for poor performance was fair.

Appraisals also help employers to identify employees' training needs, so that performance issues can be remedied before they become a major issue.

7. Give employees the opportunity to improve.

As a general rule, employers must give employees who are underperforming an opportunity to improve. This usually requires employers to provide relevant training and offer appropriate support. Improvement will not happen overnight. A fair performance management process usually takes weeks or months. If employers do not follow a fair procedure or give employees a reasonable opportunity or the necessary support to improve, a subsequent dismissal will almost certainly be unfair (although, in limited cases, the employment tribunal may make a deduction from compensation for the employee's contributory fault).

8. Set reasonable targets and make them clear to employees.

An employer that sets unreasonable or unattainable targets, and dismisses an employee for failing to reach those targets, is likely to be heavily criticised by the employment tribunal in the event that the employee brings an unfair dismissal claim, particularly if the employer did not make the targets clear. Equally, setting objectives that are too easy to achieve will make it very difficult for the employer to assert that the employee was underperforming if he or she does achieve them. Managers need to think very carefully when setting objectives; the aim is to set objectives that stretch employees but that are realistic. If the employee agrees to the targets, failure is less excusable. However, prior agreement will not necessarily render a dismissal fair.

9. Take into account mitigating factors.

As part of its investigation into an employee's poor performance, the employer should take into account mitigating factors that may be adversely affecting the employee, to establish the true reason for his or her underperformance. Mitigating factors could include, for example, illness (which the employer should address through its ill-health procedure), domestic issues, poor quality or inadequate supervision, work overload, or bullying or harassment. The employer should address any mitigating factors over which it has control, before it takes action against the employee.

Next week's topic of the week article will be a case study on dealing with poor performance and will be published on 7 November.

Caroline Noblet (caroline.noblet@ssd.com) is a partner at Squire Sanders Hammonds.

Further information on Squire Sanders Hammonds can be accessed at www.ssd.com.