How to fire for poor performance
By Robert Dixon, Employment Partner, Turbervilles Solicitors
November 2 2012 - Much has been said recently by the Government about how its current package of intended employment law reforms will help create a climate in which it will be easier for employers to dismiss under-performing staff. The Government argues that this will give businesses - especially small businesses - the confidence to take on more staff, thereby aiding growth and economic recovery. But how difficult is it, in fact, to fire under-performing staff and will any of the intended reforms actually make a difference?
Dismissing new employees
One crucial point to remember is that employees are only protected against unfair dismissal once they have been employed for at least two years (one year if their employment began before 6 April 2012). There are certain types of dismissal which are forbidden from day one of employment (for example, dismissing someone because she is pregnant or for whistleblowing or for exercising a statutory right) but dismissing an employee in the first two years because his performance is not up to scratch will not be an unfair dismissal.
Businesses therefore already have a lengthy opportunity in which to assess their new employees and, without fear of comeback, to weed out poor performers before they become established.
How best to go about this? Taking on a new employee usually involves a significant investment in both time and money. It obviously makes sense to give that employee every possible chance to succeed. Equally, his work must be subjected to rigorous scrutiny.
Whatever its size, the employer should provide a new starter with a proper induction into the business and his role within it. This induction should include setting and communicating the standards of performance expected of the employee with, where appropriate, specific targets and timescales. That way, everybody knows what is expected. Any training needs should be identified and, if necessary, a training plan for the employee put in place.
New appointments should always be made subject to completion of a satisfactory probationary period. The reality is that every new employee is on probation for two years but psychologically a probationary period of more than 6 months probably would not work. A typical period is 3 months - normally long enough for the employer to complete a proper assessment of the employee's skills and his aptitude for the role. If it soon becomes clear that the employee simply cannot do the job then his employment should be ended straightaway. There is no need to wait until the end of the probationary period. If by the end of the probationary period there are still doubts about the employee's capability then the employer should explain the position carefully to him and extend the period of probation.
If the decision is taken to dismiss an employee for poor performance during or at the end of his probationary period or at some later time before the employee has acquired protection against unfair dismissal then the process need not be complicated. The employee can simply be told of the decision to dismiss him and then either given notice and required to work it or terminated there and then and given a suitable payment in lieu of notice. Either way, the decision should be confirmed in writing and it should be made clear to the employee that his incapability or poor performance was the reason for his dismissal. One word of caution: extra care must be taken if the employer has a contractual disciplinary procedure or if the employee is within a month of gaining protection against unfair dismissal.
Of course, there is nothing preventing an employer from putting an unprotected employee through a warning procedure if he is under-performing and his work standards need to be raised. Indeed, it is good practice to do so. However, if an employee is to be dismissed for poor performance whilst he is still unprotected against unfair dismissal, it is not necessary that any prior warnings should have been given to him. Nor is it obligatory to give him the opportunity to appeal unless there is a contractual disciplinary procedure conferring a right of appeal.
Careful management of new employees ought to flush out the bad appointment decisions - the minority of people who for one reason or another should never have been appointed in the first place. However, most instances of poor performance involve employees who are perfectly capable of doing their job but who fail to maintain the necessary standard of work, whether due to lack of effort, loss of confidence or whatever. Often these issues do not arise until long after the point when the employee has gained statutory protection against unfair dismissal and with a protected employee the business does have to take much more care.
Dismissing protected employees
Under the present law, a protected employee who consistently under-performs can be fairly dismissed on the ground of "capability". However, in order to dismiss such a person fairly, his employer must follow a fair and reasonable procedure. As a minimum, the employer must observe the guidance set out in the ACAS Code of Practice on Disciplinary and Grievance Procedures. Many employers find the prospect of having to confront their employee and then take him through what seems likely to be a time-consuming, stressful and risky disciplinary process impossibly daunting. Often employers will simply back off and put the problem into the "too hard" tray where it can fester and create other difficulties. Sometimes employers will dive in feet first and find themselves facing a constructive unfair dismissal claim as a result. Other employers look for a less confrontational way out - offering their employee a compromise agreement settlement which can prove expensive or, if the tactic backfires, very expensive.
In reality, tackling a poorly performing employee, if it is handled properly, need not be as problematic as people think it is going to be. The key is to be firm, organised and methodical and to ensure that a disciplinary process is set up and followed through fairly either to the point where the employee is back on the "straight and narrow" or until he is dismissed (assuming he does not first wake up to the reality of what is happening and resign). Achieving this is always going to be easier in a larger organisation because of its greater resources. The owner of a smaller business does, though, have the consolation of knowing that when an Employment Tribunal is scrutinising the fairness of a dismissal, it will take into account the size and resources of the organisation in question.
Employers also need to bear in mind that the consequence of failing to address performance issues goes beyond avoiding unfair dismissals - it is an important part of maintaining positive performance and morale, with productive members seeing that under-performing colleagues are dealt with.
Following a far and reason procedure will involve taking some or all of the stages described below, all of which should, for the benefit of both employer and employee, be set out in more detail in a published disciplinary procedure. From the employer's perspective, it is preferable if this procedure is described as being non-contractual.
While managers often do not want to confront employees over perceived inadequacies in their performance, sometimes all that is needed is an informal meeting to make an employee improve - to be clearly reminded what standards are expected of him and where he is falling short. In many cases the employee will react positively and sharpen up his work performance rather than have to go through a formal procedure. However, where an employee's poor performance is evidently due to a more deep-seated attitude problem, it may be more appropriate for the employer to go straight to the formal stage of the disciplinary procedure.
This differentiation highlights the point that the possible causes of an employee's poor performance should always be investigated right at the outset, one additional purpose being to identify any possible health-related issues which may amount to a disability under the Equality Act 2010 and require the making of reasonable adjustments to be considered.
It is also essential in every case of poor performance for the employer to consider at the outset whether any information, training, resources or other forms of support might be needed by the employee to assist him to achieve the required standards. This is something which should be discussed with the employee and, if necessary, followed up.
If the employee is approached informally about his poor performance, he can, if it is thought appropriate, be given an informal verbal warning. He must be told exactly what aspects of his work need to improve and how. The employer must set a review period and make the employee aware that his performance, or aspects of it, will be monitored during, or at the end of, that period. The employee must be told that if there is insufficient improvement then the formal procedure will be invoked. The employer should keep notes of what was discussed and details of the informal warning, although verbal, should be confirmed in writing to the employee. A copy of the notes and of the written confirmation should be placed on the employee's personal file.
If after an informal warning has been given a review shows that the employee is still not performing satisfactorily, then the formal procedure should be implemented against him. That said, there are a limited number of situations when it might be fair to dismiss an employee for poor performance without actually going through a formal disciplinary process. For example, there may be no need to give formal performance warnings where the employee is so patently unqualified or otherwise unsuitable for the role that it would be a complete waste of everyone's time to put him through a series of graduated warnings; or where the employee is highly unlikely to improve and his retention during a formal disciplinary process would be highly damaging to the employer's business interests; or where the employee has already demonstrated that he is incapable of changing, or unwilling to change (perhaps refusing to admit he is performing badly); or where the employee is performing very badly in a senior position and already knows, or ought reasonably to know, his job is in jeopardy. It goes without saying that an employer who proposes to dismiss someone on the ground of incapability without first going through a warnings process must tread extremely carefully.
Formal warning stages
A formal disciplinary procedure, when applied to performance shortcomings, will conventionally consist of three warning stages with each stage resulting in a progressively serious level of warning. A typical model will be: stage 1 - verbal warning; stage 2 - first written warning; stage 3 - final written warning. An alternative model could be: stage 1 - first written warning; stage 2 - second written warning; stage 3: final written warning. A three-stage procedure can, of course, be very protracted and therefore a two-stage procedure, with just first and final written warnings, can in some instances be justified. This will particularly be the case where, because of the nature of the employee's job, a relatively long performance review period has to be used. For example, the natural review period for a sales person, if there is a time lag between the person making the sales pitch and the receipt of customer orders, might be three months whereas for a different type of employee the natural review period may be only a month. So with some employees a two-stage procedure might be justified though with the majority of employees it would probably (but not necessarily) be more appropriate to use a three-stage procedure. The disciplinary procedure should be flexible enough to allow the business to adopt either model.
At each stage of the procedure, the following points will arise:
- The employer will write to the employee to advise him that his performance (or aspects of it) is considered to be unsatisfactory and why, inviting him to a meeting to discuss it. The letter or email should make it clear which stage of the employer's published disciplinary procedure applies and alert the employee to the possible sanction(s) that might arise. The employee should be advised of his right to be accompanied at the meeting by a work colleague or trade union official.
- At the meeting, the employer will: review the employee's performance against the required standards, explaining his perceived shortcomings from management's perspective; give the employee the opportunity to respond; if appropriate, discuss any personal circumstances or other factors which could be contributing to the poor performance and review support measures already taken or which could be taken to help the employee improve.
- If, following review at the meeting, the employer decides the employee is under-performing (or still under-performing) and that some sanction (or further sanction) is called for, the next stage of the procedure should be implemented. Realistic performance targets and time scales should be discussed and, if possible, agreed. These should be linked to an appropriately worded warning and care should be taken to ensure that the warning follows the format described in the employer's published disciplinary procedure.
- The employer should take full notes of the meeting and send them to the employee along with the outcome. If a formal warning is given, the letter or email must notify the employee of his right to appeal against the decision.
Where an employee is given a final written warning but fails to achieve any, or a sufficient number, of his performance targets in the following review period, the employer can set up a further meeting with the employee which, barring something unexpected, will lead to the employee's dismissal. The employer should write to the employee to advise him that his performance (or aspects of it) is still considered to be unsatisfactory and why, inviting him to the meeting to discuss it. The letter or email should make it clear that the final stage of the employer's published disciplinary procedure applies and alert the employee to the fact that the meeting might result in his dismissal. The employee should, as before, be advised of his right to be accompanied at the meeting by a work colleague or trade union official.
If (as is often the case) all the previous meetings in the process have been conducted by the employee's line manager, consideration should be given to arranging for the dismissal meeting to be chaired by a different manager. Normally this will not be necessary bearing in mind that if the employee is dismissed and exercises his right of appeal, a different manager will review the decision at that stage. However, sometimes - especially in larger organisations - it can make sense to bring in a different manager to deal with the dismissal meeting. It is no bad thing at the dismissal meeting, if resources permit, for the line manager to present the company's case against the employee and for a more senior manager to chair the meeting.
At the meeting, whoever is chairing it, the employer should review the employee's performance against the targets which were set when he was given his final written warning, pointing out how he has fallen short of those targets. The employee must then be allowed to put forward his case. Any points of substance raised by the employee must be addressed. This may necessitate an adjournment of the meeting to enable those points to be investigated. The length of the adjournment will depend on what has to be investigated and how long it will take for the investigation to be properly carried out.
If the decision is then taken to dismiss the employee, he should be informed verbally (preferably face-to-face) and given the reasons. The decision must be confirmed in writing and the employee notified of his right of appeal. The letter or email must clarify whether the employee is being given notice and required to work it or whether his employment is being terminated with immediate effect with him being given a payment in lieu of notice.
None of the proposed reforms will directly affect the steps an employer should take, as described above, if it wishes to dismiss an under-performing member of staff whilst avoiding or minimising the risk of an unfair dismissal claim.
The Coalition is, however, planning to stimulate the use of compromise agreements (or "settlement agreements" as they are to be known). The proposal is to standardise the agreement documentation as much as possible. That is a welcome development but on its own it is not going to encourage settlements or deals. More radical is the idea of employers and employees being able to have "protected conversations" with a view to agreeing severance terms. The thinking is that anything said in such a conversation would be inadmissible in evidence in any subsequent Employment Tribunal case (i.e. if no deal was done and litigation ensued) and that this would encourage employers and employees to get their heads together to work out mutually agreeable terms. At first sight this might seem like an excellent idea but the likelihood is that so many safeguards and exceptions will be embedded in the legislation that it will prove unworkable.
For more senior levels of employee, the Government has recently unveiled plans for arrangements under which employees will be able to have an equity stake in the businesses they work for in return for giving up certain employment rights including the right to claim unfair dismissal. Initial reaction to this proposal has been mixed but, even if it does come to fruition in due course, the initiative is only likely to apply to a small number of employees.
Despite all the Government sound-bites and media hype, it is unlikely that new employment laws are going to have any positive practical effect on the challenges businesses up and down the UK face when deciding what to do about poorly-performing staff, especially those who are protected against unfair dismissal. The truth is that, other than by throwing a lot of money at the problem, there is no quick or easy fix. Employers do, though, need to realise that dismissing poorly-performing employees without winding up in the Employment Tribunal can be done. It cannot be done overnight. But if businesses are firm, organised and methodical, it can be done.
Robert Dixon specialises in employment law and human resources and has been a partner at Turbervilles since 1989. He currently jointly heads the firm's HR & Employment Law department. firstname.lastname@example.org
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