How to dismiss staff on the grounds of capability: up to the task?

Capability, as a potential reason for dismissal, is something of a poor relation to redundancy and misconduct. Dismissing an employee on the grounds of capability (or rather incapability) is perceived to be a lengthy and complicated process, which inevitably leads employers to look for more apparently simple options.

But capability dismissals can be an invaluable tool and a natural extension of good performance management.

In law

In the context of unfair dismissal, "capability" is assessed as an employee's "skill, aptitude, health or any other physical or mental quality" (section 98(3)(a), Employment Rights Act 1996) that affects his or her ability to do the job. This, in practice, provides the potential for fair dismissal in relation either to performance or ill-health (both long-term and intermittent). While there may be an overlap, here we will focus purely on performance-related dismissals.

Larger employers may well have a capability procedure in their employee handbooks. Provided the procedure is non-contractual and not unnecessarily onerous on the employer, this can be useful and provide direction. The key to a speedy process, however, is a continuous appraisal system. If performance figures and/or data on key performance indicators are available, a capability procedure can be implemented quickly and safely.

Performance record

A capability dismissal is more difficult when there has not been a continuous process of performance appraisals and no objective data is to hand. Where employees cannot be assessed against numerical targets, performance appraisals are invaluable. However, this does not mean the process is lost to those employers with less extensive HR records.

In the first instance, performance issues should be dealt with informally by the employee and their manager. This is part of day-to-day management and will hopefully help guide an employee, ensure they are aware of what is expected of them and prevent problems arising. If there are problems that need to be addressed, targets should be set and a timescale for review agreed. In some cases, an informal verbal warning may be given.

Time scale

If an informal hearing is insufficient or not appropriate, a formal procedure will be necessary. This will involve a capability hearing, where the employee has the right to be accompanied and the usual statutory procedures apply. The purpose of a capability hearing is to:

• set out why and how the company considers the required standards have not been met
• provide an opportunity for the employee to explain the poor performance and ask any relevant questions
• discuss measures, such as additional training or supervision, which may improve performance
• set targets and a timescale for improvement and review.

Following the hearing, a first written warning may be given, setting out the areas discussed and the consequences of failing to improve within the review period, or of further unsatisfactory performance.

If performance does not improve satisfactorily, the matter may be progressed to stage two or the review period may be extended. In the case of a second capability hearing, the process and discussion points are similar to those in the first stage, but the emphasis is on why the targets have not been met. A timescale for review will be set and, if appropriate, a final written warning will be given. This would set out the matters already discussed and the consequences of failing to improve within the timescale, or of further unsatisfactory performance. A final written warning will normally remain active for between six and 12 months.

A failure within the final review period or further poor performance after a final warning will lead to a further hearing. This will, again, look at the failings and possible reasons for them. Dependant on the response, it should be established whether there is any reasonable likelihood of the required standard of performance being met within a reasonable time frame. Any practical alternative to dismissal, such as redeployment to another available job of the same grade, should also be considered. If no options exist, dismissal will be appropriate.

Appeal

Dismissal will normally be with full notice or payment in lieu of notice. Appeals should be offered following all stages of the formal capability procedure.

The level of performance expected of an employee will depend on salary, status and seniority. A capability dismissal will generally require a more flagrant failure to meet standards for those employees lower down the employment ladder than those at the top. However, if employers are able to show that they have genuinely attempted to avoid dismissal, tribunals will often take a more sympathetic approach.

Gareth Kervin is a solicitor at law firm Kingsley Napley

Top tips

• Keep the employee fully informed at all stages
• Look to avoid a dismissal wherever possible
• Use clear and achievable objectives at all stages
• Offer assistance and training where reasonable
• Keep the employee informed of the consequences of not meeting targets
• Comply with the statutory procedures throughout the process
• If ill health becomes an issue, deal with it separately and under the appropriate procedure.