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Performance management: Don’t bury bad news

Whilst retaining high performing employees in the workplace is crucial, it is equally important to deal effectively with poor performance. if left unchecked, poor performance impacts on business efficiency, employee morale, and organisational culture.

The legal framework

If you have an underperforming employee, you can’t usually ‘cut your losses’ and just ask them to leave. Employers who do this risk potential claims for unfair dismissal and discrimination.

Employees with at least two years’ continuity of service have a right not to be unfairly dismissed by their employer. If an eligible employee is unfairly dismissed, they can bring an unfair dismissal claim in the Employment Tribunal, claiming loss of earnings up to a current cap of one years’ gross salary or £115,115 (whichever is the lower). If you get it wrong, it can be costly.

‘Capability’ is listed as one of the potentially fair reasons for dismissal in the Employment Rights Act 1996. Capability includes poor performance. It is potentially fair to dismiss a poorly performing employee but only if it is a reasonable decision to take and a reasonable procedure is followed. When looking at reasonableness, tribunals focus on whether the employee was given the opportunity to improve, whether they were warned of the possibility of dismissal and whether the employer provided adequate support.

The ACAS Code of Practice on disciplinary and grievance procedures applies to performance dismissals. Employers need to be aware of what the Code says and make sure that their processes align with it. An unreasonable failure to follow the ACAS Code can lead to an uplift of up to 25% on any compensation awarded by the tribunal for unfair dismissal.

There is a separate risk of discrimination claims where performance issues have their root in a protected characteristic. Understanding the background is, therefore, crucially important.

Special Considerations: Disability, Bullying, and Menopause

Employers should always look beneath the surface of any performance issue before taking formal action. Is the employee really incapable? Or has their performance dropped for some other reason? Early investigation is particularly important where performance levels suddenly drop off.

Performance issues can have their root in disability, workplace bullying, or the effects of menopause (amongst other sources). Ask the employee to explain any background to their current difficulties before embarking on anything formal.

If the employee might be disabled then you are under a legal obligation to make reasonable adjustments to remove any substantial disadvantage they may be experiencing at work. You must also make sure you do not treat them unfavourably because of something that arises from their disability unless you can reasonably argue that it is legitimate and proportionate to do so.. Both of these obligations may involve a relaxation of your standard performance management processes.

If the employee is experiencing menopause symptoms impacting on performance then the employer should react sensitively. Menopause can amount to a disability. It has also been held to be both age and sex discrimination to treat an employee less favourably because of the menopause. In Merchant v BT plc Ms Merchant successfully claimed sex discrimination after she was dismissed following a final warning for poor performance. She had previously given her manager a letter from her doctor explaining that she was ‘going through the menopause which can affect her level of concentration at times’. Her manager chose not to carry out any further medical investigations of her symptoms before dismissing her.

More haste, less speed – the role of  probationary periods

Employees with less than 2 years’ service do not have ordinary unfair dismissal rights. If, following investigation, you are content that an employee’s poor performance is not linked to a protected characteristic (so discrimination is not in play) then you could choose to dismiss the underperforming employee (with notice) without following a full formal process.  Even then, you should consider whether there are any other risks specific to that employee: for example, there is no qualifying period for employees to bring “automatic unfair dismissal claims” in the event that, say, they believe they have been dismissed because they are a whistleblower or for raising health and safety concerns.

Employers should be aware that a change of government could alter this position as Labour have revealed plans to make unfair dismissal a day one right (subject to reasonable probationary periods). If this happens then employers will no longer be able to dismiss before the two year mark as a way of avoiding the possibility of unfair dismissal claims.

Set expectations with employees

You need to give employees a clear view of the level of performance expected of them. If you don’t keep on top of performance then it will be that much harder to claw the position back.

Job descriptions and appraisals are key performance management tools.

Job descriptions: These are generally role-specific and are often issued at the start of employment alongside contractual documentation. They should not be stated to be contractual – you don’t want to have to get the employee’s agreement to alter them! Our top tip is to keep job descriptions under review – amend them as roles evolve so that they remain current and relevant.

Appraisals: Employees should expect to receive a formal appraisal of their performance at least once a year. Many employers are moving towards a more regular and informal appraisal process with quarterly or monthly check-ins. This approach may help to identify any performance issues quickly but it still needs to be thorough and an overly informal approach could be counterproductive. All appraisals should be documented and should include the setting of objectives for the coming months – performance aims which can then be reviewed to assess achievement.

Conducting a Fair Performance Management Process

You might already have a performance management policy in place in your business. If you do, ‘dust it off’  and review it. Is it fit for purpose? If it is then use it. Train your managers to use it.

A solid performance management process should generally include all of the following elements:

  • An initial investigation – a fact finding process to understand why performance issues have emerged. By doing this first, employers are well-placed to identify discrimination risks at an early stage.
  • An informal review of performance to give the employee a ‘heads-up’ and a short review period. This should generally take-place before any formal process begins. If there are any quick fixes or performance improves then there may be no need to take matters any further.
  • A formal and structured review process. These are often underpinned by a ‘PIP’ or ‘performance improvement plan’. This is a document which sets out key performance targets which the employee must meet, a timescale for improvement and any measures which the employer will put in place (for example mentoring or training) to help the employee to reach the required standard. A review date will be set.
  • If the required standards are not reached by the end of the review period then a formal process of meetings and warnings can begin. A formal meeting should be held. A warning may be given. The employee has the right to appeal each warning. Employees should usually be given a period of at least one month between formal warnings in which to demonstrate improvement, although the appropriate period will depend on an employee’s role and how quickly they can reasonably be expected to demonstrate improvement.
  • The warnings escalate – beginning with a written warning and then escalating if targets are continually missed to final written warning and, eventually, dismissal with notice.

Remember that the ACAS Code applies. The employee should be given all evidence upon which the performance warning is being based prior to any meeting. They have the right of appeal against any formal warning imposed. Before any final performance meeting the employee should be informed in writing that dismissal is one of the potential outcomes.

The employee has the right to be accompanied by a work colleague or trade union representative at any meeting which may result in formal disciplinary action – including a formal performance warning.

It is not a job that anyone relishes – telling someone that they are not up to scratch. But it is crucially important that HR take the lead and give businesses and managers a clear framework in which these conversations can take place. Have clear processes – but try and emphasise the positive. This is about employees being empowered to ‘be their best’ – not about punishment. Phrases like ‘helping you to be the best you can be’ or ‘guiding you towards stronger performance’ sound a lot more positive than ‘performance management’. The process remains the same but the message can be subtly tweaked to bring employees along with you. Additionally, an Employment Tribunal will expect a performance management process to be aimed at helping an employee to improve rather than seeking to engineer a dismissal so positive messages will also help with an external audience.

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