The decision to dismiss an employee based on unsatisfactory performance, or otherwise step in to formally address the issue, is a challenge that most employers have to face at one point. It can be a stressful and confronting prospect, especially for managers who do not want to, or do not know how to, conduct effective performance management.

To complicate matters, unsatisfactory performance cannot be dealt with quickly or easily. It is often difficult for an underperforming employee to receive and accept feedback, even if the feedback is given kindly and constructively.  Yet if underperformance is left unchecked, it can adversely affect the morale of other employees as well as negatively impact the performance of a business as a whole.

Notwithstanding the above challenges and difficulties, there are a number of simple guidelines and processes that an employer can follow to effectively manage unsatisfactory performance and to assist in minimising the risk of unfair dismissal claims being made against the business.

Let’s first take a quick look at what defines unsatisfactory work performance and common causes for it.

What is poor performance?

This is important for employers to understand so that they can recognise the signs and evaluate whether an employee’s performance is actually poor or could be a result of something else. For example – a lack of access to resources necessary to complete their job.

Poor performance can be one, or a combination of the following:

• A failure to satisfy the requirements of the job (e.g. the position description spells out the duties, responsibilities and key competencies of a role)
• A failure to meet the standard of work expected by a manager/supervisor
• A failure to meet required set objectives (e.g. quality, quantity etc.)
• A failure to operate within expected behaviours
• A failure to comply with work practices, policies or procedures
• Disruptive or negative behaviour in the workplace

What are reasons for underperformance?

Some of the most common reasons for underperformance are:

• The employee does not know or understand expectations, goals or policies
• The employee often does not know that he or she is underperforming because they have not received clear feedback
• Interpersonal differences between manager and employee
• Poor communication between management and employee on expectations and performance
• Mismatch between capabilities and the job requirements (e.g. not the right person for the job)
• Lack of personal motivation or stimulation, low morale in the workplace or poor work environment
• Personal issues or external factors impacting performance (e.g. physical health issues / family issues / mental health struggles / drugs / alcohol)
• Workplace bullying or sexual harassment

Does your business need a performance management and dismissal policy?

Many businesses rely on a performance management and dismissal policy when it comes to underperforming employees. Such a policy can create certainty and consistency for performance management. However, these policies should not be set in stone.

Instead, a performance management and dismissal policy should clearly state that the policy is used only for guidance and the employer can adopt any process as it sees fit. It’s best that employers do not have a contractual obligation to follow a particular performance management process. Otherwise a breach of a policy may amount to a breach of procedural fairness.

Policies which are too prescriptive limit an employer’s flexibility and are unhelpful in the defence of either an unfair dismissal claim or a claim of discrimination.

What makes a dismissal for performance unfair?

When dismissing an employee, employers must take into consideration the possibility that the employee will lodge an unfair dismissal claim with the Fair Work Commission.

The Fair Work Commission must have regard to the following matters in determining whether a dismissal was ‘harsh, unjust or unreasonable’:

• Whether there was a valid reason for the termination related to the employee’s capacity or conduct
• Whether the employee was given an opportunity to respond to any reason related to their capacity or conduct
• Whether there was any unreasonable refusal by an employer to allow the employee to have a support person present to assist at any discussions relating to the dismissal
• If the termination related to unsatisfactory performance by the employee
• Whether the employee had been warned of that unsatisfactory performance before the termination
• The degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the termination
• The degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the termination
• Any other matters that the Fair Work Commission considers relevant such as past instances of unsatisfactory performance or how an employer has dealt with similar cases in the past.

Understanding the above criteria is necessary for employers to make an informed decision prior to dismissing an employee. The most common remedy for unfair dismissal ordered by the Fair Work Commission is financial compensation. Orders for reinstatement can also be made.

How to ensure procedural fairness when dismissing an employee for underperformance

Before any decision is made to terminate employment for poor performance, an employer is required to follow procedural fairness principles. Not only that, an employer must also be able to prove that they have considered all issues and taken all necessary steps to rectify poor performance.

Evidence for proving this can include keeping detailed records of conversations with an employee as well as copies of written warnings. Without such evidence, the Fair Work Commission can find in favour of an employee in an unfair dismissal claim.

Furthermore, employees are entitled to know and understand the allegations of underperformance. Employers should try to put themselves in the shoes of their employees. It may be the first time they’re being told they’re not doing a good job.

When informing an employee that there are performance concerns, employers need to maintain a neutral, matter of fact tone. There is no place for blame or negativity, as this will not likely effect positive change. Employers also need to provide specific examples of poor performance such as unprofessional conduct, breach of duty or not meeting expected goals.

Note that the concept of ‘three warnings’ is a myth. There is no formulaic approach to dismissing an underperforming employee, but there are best practices for procedural fairness which employers can follow as per the below:

• Determining what must occur to rectify underperformance
• Considering personal circumstances such as difficulties in an employees’ personal life that may be contributing to their poor performance
• Considering other sanctions short of dismissal would be appropriate such as a demotion, redeployment or a formal warning
• Considering seeking a second opinion or advice from HR professional and/or an employment lawyer before dismissal
• Advising the employee of expectations (e.g. targets and objectives), providing them with an opportunity to respond and ensuring timeframe for improvement and opportunity to respond is fair
• Allowing reasonable time to improve – depending on the nature of the job and the industry, this could be as much as 2 to 3 months.
• Providing training and assistance to the employee so that they can improve
• If work performance does not sufficiently improve, providing a first warning to indicate what is expected – verbal and in writing
• Repeating the whole process and advising that dismissal is a possibility if performance is not sufficiently improved. This counts as a second warning.

If after all of the above has not yielded improved performance, the employer holds another formal disciplinary meeting and can then decide to issue another warning or otherwise call for a formal meeting with the employee to inform them of the intention to dismiss them.

The employee needs to be made aware of the nature of the disciplinary meeting beforehand and may be provided with the opportunity to bring a support person. It’s important that the employee is provided with a chance to respond to the allegations . Employers need to listen to what the employer has to say and either decide to give them another chance or inform them of their formal decision to dismiss them.

Once an employee has been dismissed, they have 21 days to lodge an unfair dismissal claim with the Fair Work Commission. Provided that procedural fairness has been followed and documentation kept, employers are in the best possible position to defend any such claims.

Remote performance management and working from home

Post-pandamic with more employees than ever before working from home either part time or full time, virtual performance management is a new playing field for employers.

If an employee is not performing to the standard required, employers are entitled to implement performance management processes, notwithstanding that employees are working remotely.

However, employers need to have regard to any barriers to performance that have arisen due to working flexibly and remotely, and any other mitigating factors including:

• Reliance on sub-standard home office or home internet and computer devices may not be reliable, up-to-date or fast
• Difficulties in contacting persons
• Supervision and guidance may be impacted by remote supervision
• Employees may be managing concurrent responsibilities of caring for children/family members/pets whilst at home
• Blurred boundaries of home life and work life
• Employees not taking breaks and/or working various hours
• Employers have difficulty in understanding what employees are doing and in offering assistance and support
• Performance issues may be related to being alone or being isolated
• Procedural fairness virtually, and this is a challenge practically and legally
• Performance issues may, in fact, be related to working remotely

Failure to take into account these types of matters may result in a termination of employment being found to be harsh, unjust or unreasonable by the Fair Work Commission. Employers should proceed with caution when making any dismissal decisions and ensure procedural fairness continues to be adhered to despite employees working remotely.

Need some advice on how to handle and manage underperforming employees? Talk to the experts at Harrisons.

Claire Harrison

Claire Harrison is the Founder and Managing Director of Harrisons, a flourishing HR consulting business that sprouted in 2009 from Claire’s passionate belief that inspiring leaders and superstar employees are the key success factor to any business. With over 20 years’ experience, Claire has worked as a HR Director of multi-national organisations, as a Non-Executive Board Director, and a small business owner. Claire’s corporate career includes working with companies such as BHP, Westpac, Fonterra and Mayne Nickless.