Poor performers: a satisfactory outcome

Is it unlawful to dismiss an employee for incompetence?

No. Under the Employment Rights Act 1996, the lack of capability or qualification of an employee can be a fair reason for dismissal. Capability is assessed by reference to skill, aptitude, health or any other physical or mental quality. However, before dismissing an employee on performance grounds, an employer must carry out a proper investigation into the employee’s performance and give them a full and fair opportunity to rectify the problem.

Will invoking the company disciplinary procedure be the best means of dealing with all absence and poor performance?

A distinction should be made between absence due to a medically certified illness and unauthorised absence or malingering. The same distinction should be made between poor performance due to carelessness or laziness and that due to the employee’s inherent inability to function. Where an employee is absent through ill health or injury or genuinely unable to reach the required standard of work, the issue becomes one of capability.

Where we stipulate a probationary period for new employees, must we wait until the end of this period before dismissing an unsatisfactory probationer?

A You do not need to wait until the end of a probationary period before dismissing an unsatisfactory employee. It is common for employers to stipulate a probationary period for new employees, particularly those at junior or middle level, and periods of three or six months’ probation are the most common. However, a probationary period has virtually no effect on the employer-employee relationship.

The purpose of the probationary period is simply to enable the employer to monitor and appraise the probationer in the initial stages of their employment to ensure that the required standards of performance and conduct are being reached. If the probationer turns out to be unsatisfactory during the probationary period, you can take the necessary steps to dismiss them without waiting for the probationary period to come to an end.

Ensure you follow contractual disciplinary procedures before the dismissal and comply with the statutory three-stage dismissal and disciplinary procedure. You must give the required period of contractual notice or statutory notice, whichever is the greater.

Can we dismiss an under-performing employee on a fixed-term contract before the end of the fixed term?

The nature of a fixed-term contract is usually that both employer and employee agree as part of the contract that it will continue for a fixed period, or until an agreed task or project is completed, or until a specified event occurs, for example, the return to work of an employee on maternity leave.

Thus, any early termination by either party will be in breach of contract. The only exception to this would be in the case of gross misconduct on the part of the employee, which would entitle the employer to terminate the contract without notice. Otherwise, a termination in breach of contract would give the employee the right to claim damages equivalent to the pay and benefits that they would have received up to the time that the contract could have been lawfully terminated.

If, however, the fixed-term contract has been drafted to include a notice clause – ie, authority for the employer to terminate the contract on notice before the expiry of the fixed term – then termination on notice by reason of the employee’s under-performance will not be in breach of contract. It is not unlawful to include notice clauses in fixed-term contracts.

Quite apart from any potential claim for breach of contract, there may be an unfair dismissal claim from the employee if, at the time the early termination of the contract takes effect, they have gained a minimum of one year’s continuous service, whether on one fixed-term contract or on two or more successive contracts. Although unsatisfactory performance is a potentially fair reason for dismissal, the employer would also have to show that the under-performance was sufficient in all the circumstances to justify dismissal and that a fair procedure, including the mandatory steps of the statutory dismissal and disciplinary procedure, had been followed. If you were unable to satisfy a tribunal on these matters, the dismissal would be unfair.

How to handle an employee who is under-performing

  • Deal with most minor, day-to-day performance issues on an informal basis, and institute a formal procedure only if the problem escalates or persists.
  • Always bear in mind that the primary aim of the process is to achieve an improvement, not to dismiss the individual.
  • If formal action becomes necessary, investigate whether there are any underlying reasons for the individual’s poor performance.
  • If dismissal is a possible outcome, ensure you comply with the requirements of the statutory dismissal and disciplinary procedure.
  • Give the employee an opportunity to explain their under-performance and agree the improvement needed and the timescale in which this must be achieved.
  • Provide additional support, supervision and training as necessary.
  • Where the employee fails to improve to an adequate level, consider a further period of time for improvement, redeployment or dismissal.
  • Where the decision to dismiss is taken, offer the employee the right to appeal against this.
  • Keep notes and records throughout the process, as these may be required to demonstrate the fairness of any eventual dismissal.


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