In Short
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Be alert to underperformance using agreed job descriptions, KPIs and regular informal check-ins. Spot issues early and formally review at least annually (even more often in probationary periods).
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Formalise underperformance steps: meet privately, issue a clear, reasonable Performance Improvement Plan (PIP) in writing, including targets, timeframes and consequences, and check in regularly.
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Document everything. A written warning and chance to improve are key to defending against unfair dismissal claims. Seek legal advice before terminating employment.
Tips for Businesses
Keep performance expectations clear, measurable and fair. Act early by addressing issues through constructive, private conversations and use a written PIP with realistic goals. Maintain regular documentation and do not skip legal checks before dismissing someone.
Employees are the lifeblood of any business. Supporting your employees’ professional development can therefore promote productivity and greatly benefit your business. As an employer, this may involve undergoing performance reviews to monitor an employee’s contributions to your business. To manage an underperforming employee, it is important to have appropriate procedures for employment termination. This article sets out how you should approach performance reviews and how the law protects you against potential unfair dismissal claims.
How to Recognise Underperformance?
An employee is usually underperforming if they are repeatedly not meeting the requirements of their role. These are set out in:
- the employee’s position description;
- contract of employment;
- key performance indicators;
- company policies; or
- any other communications to the employee.
Managers or business owners usually notice an employee’s underperformance during a formal performance evaluation, but may also observe it in daily business activities. In order for you to identify performance issues swiftly, regular performance reviews and informal check-ins with your employees are essential.
Ideally, direct managers should have regular informal check-ins with junior employees. Additionally, the business should conduct formal annual or biannual reviews based on key performance criteria. This is particularly important within an employee’s first six months, when termination for performance issues is typically much simpler.
How to Address Underperformance?
It is best practice to address underperformance in a private meeting with the employee and their direct manager. You should aim to discuss any issues causing the employee to underperform and develop an action plan to improve their productivity. This performance improvement plan should be in writing and clearly state the:
- key performance criteria that the employee is expected to meet;
- timeframe for monitoring their performance; and
- consequences for failing to meet the criteria.
When drafting the key performance criteria, you should ensure that the targets and timeframes are:
- reasonable;
- clearly articulated and
- easily measured.
Throughout the agreed period of the performance improvement plan, you should have regular check-ins with the employee to assess their progress in meeting their performance targets.
Generally, as an employer, you might also consider providing additional training to your staff members to help improve their performance.
Continue reading this article below the formHow Can I Protect Myself From Legal Complaints?
The law does not strictly require you to provide formal documentation or warnings to underperforming staff. However, doing so will protect you in the event that a terminated employee brings a legal claim of unfair dismissal.
The Fair Work Commission may consider an employee unfairly dismissed if you did not:
- warn your employee about their performance or conduct issues; and
- provide them with a reasonable opportunity to improve their performance.
As a checklist for best practice, you should:
- identify the underperformance issue and outline how the employee can address the problem;
- meet with the employee to discuss and create a performance management plan; and
- monitor the employee’s performance over the agreed period, including having regular check-ins to assess whether the employee is meeting the set performance criteria.
If your employee is not performing at the expected level, you may need to implement a performance improvement plan (PIP) to get them back on track. Our free PIP template will assist.
What Happens if My Employee’s Performance Does Not Improve?
The reality is that some employees might not improve within the timeframe set in their plan. Rather than rushing to terminate their employment, you should have open communication with your worker. They might require additional training or support to improve. Accordingly, see where your business can introduce more comprehensive training.
After additional training and further meetings, your employee might reach a point where they fail to action their performance improvement plan. At this stage, you will need to determine whether you want to provide the employee with more time to improve their performance or if you would like to proceed with termination.
If you decide to proceed with termination, you should make a final evaluation of the employee’s underperformance. This is to consider whether:
- the underperformance warrants termination; and
- your business gave the employee enough time to improve their performance.
Key Takeaways
It is not uncommon for employees to underperform from time to time. As a first step, you should have informal catch-ups with the employee to set out expectations. However, if an employee is consistently underperforming, you should place them on a formal performance improvement plan. You should first hold a private meeting with your employee to discuss your concerns. In the meeting, you might draft a plan that clearly states the key criteria that the employee is reasonably expected to complete within their role.
Ultimately, by communicating regularly with your employees and warning them about the potential risks if they continue to underperform, you can protect yourself from a legal claim for unfair dismissal. Above all, you should seek the advice of a lawyer before taking disciplinary action for an underperforming employee. Fortunately, our experienced employment lawyers can assist. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A PIP should clearly set out the employee’s performance issues, the expected improvements, measurable targets, a reasonable timeframe, and the consequences if performance does not improve.
In most cases, no. Employers should provide employees with a written warning, set clear expectations, and offer an opportunity to improve before dismissal.
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