Before an employer can lawfully dismiss an employee for poor performance, they must first show they have followed a process to allow the employee the opportunity to improve and meet the standards required in their role.
Failure to follow a fair capability or performance management process can lead to any resulting dismissal being deemed unfair and provide the basis of an unfair dismissal tribunal claim.
In this guide for employers, managers and HR, we explain the law on capability dismissals and share best practice on how to dismiss someone for poor performance with minimal legal risk.
Dismissal should always be considered a measure of last resort. The goal of performance management should be to help improve performance rather than justify dismissal. Employees that undergo an effective performance management process with full employer support can go on to improve and become valuable team members. It is essential to provide the individual with ample time and encouragement to make this possible. Where there is a failure to improve, the employer may have no option but to fire the employee.
What is poor performance?
When an individual doesn’t meet the requirements outlined in their employment contract, it may be considered poor performance. This is due to a problem with their ability to perform their job or function. For instance, it’s possible that a worker is failing to do their duties to the acceptable standard. Poor performance is deemed a capability issue.
If your company has a performance management process, you should follow it to address any performance difficulties your workers may have. If you have this, your company policy should specify that.
Where a performance management process is lacking, you should adhere to a process that aims to raise an employee’s performance. Your staff will be able to improve as a result, and any future problems will be avoided. Additionally, you should outline your company’s plan for dealing with subpar performance so that supervisors may benefit from your documentation.
You must make sure that the process you use to address poor performance is equitable. This is important since you must show that your decision had a justification and adhered to fair procedures if your employee’s subpar performance leads to their subsequent termination. The Acas Code of Practice on Disciplinary and Grievance Procedures should be noted as another important rule to follow.
The law on dismissing someone for poor performance
By law, there are five potentially fair reasons to dismiss someone lawfully.
The Employment Rights Act 1996 lists five fair reasons for dismissal:
Capability dismissals refer to situations where an employer terminates an individual’s employment on the grounds of poor performance where they have reasonable belief they are unable to fulfil their responsibilities to the required standards.
The Acas Code of Practice on Disciplinary and Grievance Procedures (the Acas Code) provides guidance to help employers ensure their obligations towards their employees are met during instances of poor performance.
When dismissing an employee for poor performance, employers are required by law to do so fairly. This means giving the employee reasonable opportunity to improve their performance prior to taking disciplinary action such as dismissal.
‘Reasonable opportunity’ to improve means:
- Making the employee aware of their poor performance
- Making sure the employee knows exactly what is expected of them
- Giving the employee additional training and support if necessary
- Giving the employee enough time to improve before disciplinary procedures and dismissal are considered
Knowing how to dismiss for poor performance is essential, as failing to give an employee reasonable opportunity to improve their poor performance prior to terminating their contract may constitute unfair or wrongful dismissal. There is a subtle difference between the two terms:
- Unfair dismissal: the reason you gave for the dismissal was false; the reason was genuine but unfair; or you acted unfairly by not giving them warning about the dismissal and opportunity to avoid it.
- Wrongful dismissal: You have breached the conditions of your contract with the employee in dismissing them (E.g. by not utilising the specified number of warnings, or for dismissing without warning beyond the agreed probation period).
If an employee believes you have dismissed them wrongfully or unfairly, they may make a claim against you to an employment tribunal.
Employee’s length of service
If the employee has worked for you for two years or more, they are protected from unfair dismissal and may bring a claim at the employment tribunal if their rights are breached. Employees with fewer than two years of continuous employment cannot typically file an unfair dismissal claim, unless the dismissal is considered automatically unfair.
Despite the difference in employment rights, it is generally best practice to follow a fair procedure before terminating an employee’s contract to minimise exposure to legal claims – as well as promoting better workforce relations and to managing reputation – even if you are doing so because of poor performance during the first two years of employment.
Poor performance: capability or misconduct?
Before considering how to dismiss for poor performance, it is important to ascertain the issues behind the poor performance.
Poor performance would usually be considered a conduct or capability issue, depending on the nature of the poor performance. For instance, if the employee is displaying poor performance despite their ability to perform well, this may be considered a conduct problem. An example of this would be an employee who previously hit performance targets but is now failing to do so. It would be for the employer to understand the reasons for the decline as this will influence how the issue is addressed, for example, is the change in performance due to illness, personal circumstances or conflict with a colleague.
‘Capability’ applies when the employee is displaying poor performance and failing to meet the required standards despite their obvious best efforts.
When poor performance is associated with misconduct, you should consider whether dismissing for poor performance is the most suitable option. Depending on the severity of the conduct problem, the employee’s behaviour may qualify as gross misconduct. Offences such as rudeness, aggression and repetitive lateness often come under the ‘gross misconduct’ umbrella. The employee’s contract may specify further job-specific behaviours that would be considered gross misconducts such as abuse of flexitime or disclosure of sensitive information.
In situations where poor performance and gross misconduct exist side-by-side, the employer should consider the facts to determine the most appropriate course of action. One consideration is that employers are required by law to give notice when ending an employee’s contract on the basis of poor performance, while gross misconduct allows for summary dismissal without notice. Of course, the employer would have to be certain that dismissal for gross misconduct is truly warranted, otherwise the employee may claim unfair, or wrongful dismissal.
Avoiding discrimination in capability dismissals
When dismissing for poor performance, it is essential to consider the employee’s wider situation to ensure that discrimination is not an issue. This will involve making sure that the employee’s poor performance is not in some way linked to a protected characteristic (e.g. age, sex, disability) which you have failed to make reasonable adjustments for. This could be an issue if the employee has a mental or physical impairment associated with a recognised disability, which is negatively impacting their ability to perform at work.
Unless the employer knows or should reasonably know that the employee has a qualifying disability and is likely to be at a considerable disadvantage due to their disability, the employer will not be required to make reasonable adjustments.
If the employer is aware that the employee has a disability, they must determine whether the condition is the reason for the employee’s poor performance and if making any adjustments would be both fair under the circumstances and materially helpful for the individual to overcome any disadvantage.
Before continuing with the performance management process, the employer is advised to investigate how and what impact the disability is having on the individual’s performance.
If an employee’s performance is impacted by their disability, reasonable adjustments should be made, such as changing the employee’s responsibilities, providing them with additional training, or altering the capability procedure itself, such as holding meetings at their homes if their disability makes it difficult for them to attend a meeting at work.
The employer should consider whether any unfavourable action it takes against the employee as a result of poor performance, including termination, may be objectively justified in order to prevent disability discrimination issues. The employer must be able to demonstrate that it has a valid goal, such as attaining productivity objectives, and that it has treated the employee fairly. This involves providing a solid justification for rejecting any potential solutions or adjustments.
Ultimately, following the proper procedures when dismissing for poor performance should enable you to avoid any discrimination claims. Raising the performance issue with the employee in an appropriate manner will give them the opportunity to state if they feel disadvantaged due to a protected characteristic.
ACAS poor performance dismissal guidelines
The ACAS Code of Practice for discipline and grievance sets out guidelines that employers must follow when disciplining or dismissing for poor performance. The guidelines are not laws; however, employment tribunals are legally required to refer to the code of practice when deciding if an employer acted fairly in a dismissal case. Following the Acas guidelines should protect you from unfair or wrongful dismissal judgments, should an employee make a claim against you.
Good communication, transparency and ample opportunity for improvement are the three most important factors when handling poor performance issues in the workplace. The employee must be given the chance to improve their performance before any formal disciplinary action is taken. When disciplinary action becomes necessary, the employer must provide clear and achievable targets at each stage of the disciplinary process, while making sure that the employee understands the consequences should they fail to meet those targets.
The Acas guidelines recommend that dismissal for poor performance includes:
- At least one verbal warning
- At least one formal written warning
- A final warning
Each stage of warning should be assigned a specific duration (e.g. three, six or 12 months), with the entire process taking up to around 18 months. Performance reviews should be conducted before each warning expires. If no improvement has been made, the next stage of warning must be initiated before the current stage runs out.
Poor performance and probation periods
Probation periods are used to give the employer a set amount of time to assess the new employee within their new role and the employee a set period of time to assess. During this period, employers will often look to give the employee one week’s notice to terminate the contract, taking advantage of the rule that employees can only bring a claim for unfair dismissal where they have at least 2 continuous years’ service.
However, employers are reminded that employees on probation are protected by some of the same employment rights as other employees, for example, the right to not be discriminated against. This means that while there is little risk of an unfair dismissal claim from an employee dismissed while on probation, other claims could still be possible, such as a claim for discrimination.
To reduce the risk of such claims, employers are still advised to follow a fair process, where possible, to dismiss during a probation period for poor performance. This would typically involve informal chats followed by a formal meeting.
The terms of the probation period should be included either in the employment contract, a company policy or the employee handbook. This should also include details on the process and guidelines to follow in response to poor performance, such as effective record keeping, to ensure a consistent and effective approach is taken across the organisation. If an employee fails to follow the process prescribed, they may face a claim for breach of contract.
Probation periods are typically between 3 and 6 months, but this varies by organisation and by role, since some jobs will require a longer period for the employer to make a sufficient assessment. The employer may also be able to extend the probation period under the contractual terms.
As with any dismissal, employers should assess the wider circumstances to identify any potential areas of complaint from the employee. Have they raised a grievance or could there be any other reason attributed to the dismissal rather than poor performance, such as discrimination?
How to manage poor performance
There are a few fundamental actions to take when coping with poor performance.
Deal with subpar performance right away
Making an effort to address subpar performance as soon as possible rather than later helps stop the problem from becoming out of control. The more time you give your employee to address the concerns, the more likely it is that they will do so.
Have discussions with your staff members
When an employee’s performance is a problem, you should provide them feedback and make it clear what you expect of them. It’s crucial that feedback be truthful.
Also, make careful to describe the performance issue in detail, including what it seems to be, how significant it is, and how long it has persisted. To fully comprehend the problem, you should ask your staff questions as well. Finally, since you are unsure of what could be going on in the background that might be contributing to their bad performance, you should be cautious in how you approach the issue.
Identify the reasons for poor performance
Before deciding to dismiss an employee, the employer must demonstrate that it did so with a reasonable belief in the individual’s incompetence.
Therefore, there must be proof of poor performance; otherwise, the employer would find it difficult to support its “reasonable belief”.
For example, unless there is a change in circumstances, such as the employee becoming unwell or the work changing due to possible advancements in technology, it may be challenging to demonstrate that a reasonably long-serving person is no longer able to execute their job efficiently.
It would also not usually be acceptable for an employer to use information that surfaced after the decision to dismiss an employee to support the decision to dismiss and demonstrate that its opinion was reasonable.
The employer should determine the reason for the poor performance before taking further action against an employee. This might be accomplished by a review, followed by a warning and continued performance management, and a warning that failure to improve is likely to end in dismissal.
Before issuing a performance (disciplinary) warning, the review may also highlight concerns that need to be addressed, such as the need for training and development.
As part of this, any signs of disability should be investigated to determine if reasonable adjustments should be made.
Allow the employee the opportunity to improve
In accordance with the ACAS Code, unless there has been gross misconduct or the employee is still in their probationary term, at least two warnings should be issued before someone is let go for poor performance.
How long the employee should be given to make the improvements will depend on each case. It is helpful to specify a timeframe for improvement as part of the performance management procedure.
The quality and duration of the employee’s prior employment, as well as the degree of the underperformance, may be important considerations in the absence of timeframes specified in a capacity procedure. In every case, tribunals will concentrate on what was reasonable given the circumstances.
Employers may find it beneficial to tie the timeline to a regular period of the business cycle, such as a quarterly sales target period or the length of a certain project phase. The timeframe provided for improvement may depend on how the underperformance affects relationships with customers or other third parties.
Insufficient support or training on the part of the employer may render a subsequent dismissal unfair. As a result, at every level of a capability procedure, an employer should assess if providing training and/or assistance might help the employee develop, in consultation with the employee.
The evaluation period should be scheduled by the employer. It is likely to be unreasonable if the employer doesn’t follow through after informing the employee that their performance would be examined and addressed (often midway through the timeframe specified for improvement).
If the worker doesn’t make enough progress, a formal meeting should be scheduled.
How to dismiss for poor performance: step-by-step
Employers must remember that a fair dismissal process aims to prevent dismissal, by enabling the employee to improve their performance.
Managers should refer to documentation as appropriate:
- Contract of employment
- Job description
- Training records
- Performance evaluations
- Employee handbook
- Current or previous strategies for improving performance
Your goal should not be to reach the point of dismissal as fast as possible. The steps you should follow when dismissing for poor performance are outlined below; it is important to ensure your obligations towards the employee are met at each stage, before progressing the disciplinary process.
1. Issue a verbal warning
Before any formal action is taken, the employee’s manager should make them aware of the poor performance with an informal chat. This should involve explaining to the employee precisely how their performance has fallen short of expectations. The employee should be given the opportunity to express concerns and ask for additional support. The employer must make it clear that formal disciplinary action will be pursued if performance is not improved.
2. Invite to a disciplinary meeting
According to the ACAS Code, the hearing shall take place as soon as possible but not so soon that the employee does not have time to prepare their defence. If there is a suitable internal procedure, the employer must follow it when setting deadlines. As a general rule, giving notice that is less than two working days or more than 10 working days may be deemed unreasonable.
If the employee’s performance does not improve, the employer should send an official letter or email inviting them to a disciplinary meeting. The letter must state:
- The precise nature of the poor performance
- The purpose of the meeting (to discuss disciplinary action)
- The fact that the employee may bring a union representative with them
- The possible outcomes of the meeting
- The time and date of the meeting (which must allow time for the employee to prepare responses, without unreasonable delay)
3. Hold a meeting
The purpose of the hearing is to:
- Allow both the employer and the employee to properly express their positions.
- Allow the employee plenty of time during the interview to address and explain any concerns brought up regarding their performance.
- Investigate the issue and, if feasible, pinpoint the source of the poor performance.
- Find out whether there is any remedial action that may be performed.
- Obtain the employee’s pledge to meet the necessary standard.
- Give the employee a reasonable amount of time to meet that criteria.
- Decide on a monitoring system for that time frame.
- Inform the employee of the consequences if the standard is not fulfilled.
The employer must once again fully explain the nature of the poor performance. The employee should again be given the chance to explain themselves and/or request additional support. When the meeting is concluded, the employer should decide whether to grant the employee additional time to turn their performance around, or to further the disciplinary process with an initial written warning.
The employee should be informed in writing of the meeting’s decision, their ability to appeal, any applicable deadlines, and the conclusion (which may include issuing a written warning, either a first or final warning, depending on the point in the procedure).
4. Issue the written warning
Notify the employee in writing that they are being placed on a written warning due to poor performance. State the duration of the written warning and the targets which the employee is expected to meet during that time (must be specific and realistic). Inform the employee that a performance review will take place towards the end of the warning’s lifespan.
If the employee’s performance has not improved in line with agreed targets by the next performance review, the employer may initiate a second or final written warning, following the guidelines outlined above. Should the final written warning expire with no improvement, the employer can issue notice of the employee’s dismissal.
Alternative employment or redeployment
Before firing an employee, the company should look for other job opportunities or redeployment. It might not always be possible (depending on openings, etc.), but the employer should be able to demonstrate that they have thought about it and talked to the employee about it.
Always provide an appeals option if the employer decides to terminate an employee (with or without compensation in place of notice, as appropriate). This ought to be addressed to a person with at least equal rank to that of the original decision-maker.
The employee should be notified and given written confirmation as soon as feasible after a performance dismissal hearing if the employer thinks that the employee’s performance justifies termination.
The judgement should be appealable by the employee.
If paying the employee in place of notice makes sense, the employer should take it into account.
In Fallahi v TWI Limited, this ruling underlines that tribunals often won’t question warnings sent as part of a performance management procedure before a dismissal. A worker who wants to contest a performance termination based on a prior warning will have a tough time proving that it was “manifestly incorrect.”
Even in cases where a warning during a capacity process is obviously improper, the final dismissal may nevertheless be fair. This is due to the possibility that the employer did not give the warning much weight when deciding to fire the employee. Instead, the failure to improve after the post-warning will be the basis for the dismissal decision.
However, it would be smart for employers to make sure that internal capability processes are followed and that warnings are only given in the proper circumstances. Due to the employee’s lack of improvement, the employer in this instance lost patience and decided to discontinue both the informal and formal review procedures. An early start to a formal performance management procedure far earlier in the job relationship would have been a preferable course of action. This may have also meant that the individual was fired before obtaining protection from unfair dismissal, giving the business more leeway to execute their internal procedure strictly.
Poor performance dismissal key considerations
- Whether an employer can prove objectively that a worker isn’t performing up to par and isn’t being treated differently from other workers
- Whether or not the company has communicated to the worker any performance concerns it has found and what needs to be done to improve
- Whether or not the employee has had a fair opportunity to address any faults found, as well as how long they have had to do so.
- Whether or not the business has given the employee enough guidance and training to help them get better
- Whether or not the worker was informed of the negative effects of their poor performance
- Occasionally, the employer’s consideration of alternative employment
When disciplinary sanctions are applied in respect of poor performance, the employee has the right to appeal that decision and must be informed as such. The employee also has the right to appeal the decision to dismiss for poor performance, during the required notice period. Where possible, appeals should be led by an impartial manager who was not involved in the disciplinary process.
Employees who believe they have been wrongfully or unfairly dismissed for poor performance can make a claim against their employer to an employment tribunal.
To avoid unfair dismissal complaints, employers should follow the Acas Code of Practice guidelines which explain how to dismiss for poor performance, when disciplining or dismissing their employees. If an employment tribunal finds that you have dismissed an employee unfairly, they may increase any award or penalty by up to 25%.
DavidsonMorris are experienced employment law specialists offering guidance and support to employers in relation to performance at work, managing poor performance and capability-related dismissals.
If you have a question or need help with performance management or lawful dismissal, contact us.
Dismissal for poor performance FAQs
Can you be dismissed for poor performance?
Capability is one of the potentially fair reasons for dismissal. The employer has to follow a fair procedure to including performance management before deciding to dismiss.
What are the 5 potentially fair reasons for dismissal?
The 5 potentially fair reasons for fair dismissal are conduct, capability, redundancy, statutory illegality or breach of a statutory restriction and some other substantial reason.
Last updated: 19 September 2022