Understanding how to manage underperforming staff is one of the more valuable skills an owner-manager can acquire, because poor performance is the people problem most likely to arise in any business and the one most often left unaddressed. An employee who is not doing the job properly costs the business in output, in the time of colleagues who cover for them, and in the morale of those who notice that the problem is being tolerated. Dealing with it well requires a combination of clear expectations, direct conversations, proper records and a fair process, and the law rewards employers who follow that sequence and penalises those who skip to the end.
Advising on performance issues is among the most frequent requests we receive at GAP HR. We have supported owner-managed businesses since 2003 and hold more than 300 clients on retainer, and the pattern we see most often is an employer who has been unhappy with a member of staff for months, has said nothing formal, and now wants the matter resolved quickly. The good news is that there is almost always a route to a resolution. The less welcome news is that it starts with a conversation rather than a letter of dismissal, and that the time taken to do it properly is time well spent.
Call us now on 01491 598 600 or Click Here to Make An Enquiry and we will be delighted to help you.
What Counts As Underperformance?
Underperformance is a failure to carry out the job to the standard the employer reasonably requires, whether in the quality of the work, the quantity, the speed, or the way it is done. It is distinct from misconduct, which is a failure to behave properly rather than a failure to perform. The distinction matters because the two are managed differently. Misconduct is a question of choice, and the employer’s response is disciplinary. Poor performance is usually a question of ability, and the employer’s response should be to identify the gap, support the employee to close it, and only move to formal action if that does not work.
The line is not always clear. An employee who could do the job but chooses not to apply themselves is a conduct matter dressed as a performance one. An employee who is trying hard and failing is a capability matter. Many cases involve elements of both, and part of the employer’s task in the early stages is to work out which is in play, because the answer determines the process.
Why Do Employers Find Performance So Difficult To Address?
The first reason is that it requires a conversation most people would rather avoid. Telling someone that their work is not good enough is uncomfortable, and in a small business where the owner works alongside the employee every day the discomfort is magnified. The second reason is uncertainty about what the standard actually is. If the job has never been defined and expectations have never been written down, the employer may feel on weak ground in saying they have not been met. The third is a fear of the legal consequences, which leads some employers to do nothing and others to act precipitately.
The result in many cases is a long period in which the problem is tolerated, followed by a sudden decision to dismiss. That sequence is the worst of both worlds. The business has carried the cost of the poor performance for months, and the dismissal, when it comes, has no history of warnings or support behind it and is difficult to defend.
What Should An Employer Do First?
The starting point is to be clear, in your own mind and then in writing, about what the job requires and where the employee is falling short. Vague dissatisfaction is not a basis for action. Specific examples are: the report that was late, the customer who complained, the error rate compared with colleagues, the targets that were missed and by how much. Gathering that evidence also serves as a check on the employer’s own view, because occasionally the exercise shows that the problem is less serious than it felt, or that it lies elsewhere.
The next step is an informal conversation. The employee should be told plainly what the concern is, given the examples, and asked for their account. There may be an explanation the employer did not know about, such as a health condition, a problem at home, inadequate training, unclear instructions, or a workload that has grown beyond what one person can manage. Where there is such an explanation, it will shape what happens next. Where there is not, the employee should leave the meeting knowing what needs to change, by when, and what support will be provided. A short written note of the conversation should follow, so that both parties have the same record.
How Does A Formal Performance Process Work?
If the informal stage does not produce the required improvement, the employer moves to a formal process under its capability or performance procedure. The employee is invited in writing to a meeting, told what the concerns are, provided with the evidence, and informed of their right to be accompanied by a colleague or trade union representative. At the meeting the concerns are discussed and the employee has the opportunity to respond. The usual outcome at the first formal stage is a written warning together with a performance improvement plan setting out the specific standards to be met, the support to be provided, and a review period that is long enough to give the employee a realistic opportunity to improve.
At the end of the review period, performance is assessed against the plan. If the standard has been met, the matter is closed and the employee is told so. If it has not, the process moves to a further stage, typically a final written warning and a further review period, and if that too is unsuccessful, to a meeting at which dismissal is considered. The employee should be told at each stage what the possible outcomes are, and should be offered a right of appeal against any warning or dismissal.
The Acas Code of Practice on disciplinary and grievance procedures applies to dismissals for poor performance, and a tribunal can increase compensation by up to 25% where an employer has unreasonably failed to follow it. The Code’s requirements are not onerous, but they do have to be met: investigation, written notice of the concerns, a meeting, the right to be accompanied, a decision given in writing with reasons, and an appeal.
Can An Employee Be Dismissed For Poor Performance?
Yes. Capability is one of the potentially fair reasons for dismissal, and an employer who has set clear standards, warned the employee that they are not being met, provided reasonable support and time to improve, and followed a fair procedure will usually be able to defend the decision. What a tribunal looks for is evidence that the employer gave the employee a fair chance. A dismissal that follows a single meeting, or that relies on concerns the employee was never told about, will not meet that test.
Two cautions apply. The first is that where the underperformance is connected to a disability, the employer has a duty to consider reasonable adjustments before taking action, and a failure to do so may give rise to a discrimination claim as well as an unfair dismissal claim. The second is that an employer should not use a performance process as a cover for a different motive, such as a wish to remove someone who has raised a grievance or asked for flexible working. Tribunals are experienced in identifying a process that was constructed to reach a predetermined outcome.
How Is The Employment Rights Act 2025 Changing The Position?
At present an employee needs two years’ continuous service to bring an ordinary unfair dismissal claim, and many employers have relied on that to deal with poor performers in their first two years without a formal process. From 1 January 2027 the qualifying period falls to six months, and the cap on the compensatory award is removed at the same time. Any employee who has six months’ service on that date will be protected from then on.
The practical consequences are considerable. Performance concerns will need to be identified and addressed within the first few months of employment, and the probation period, which has never had any special legal status, will need to be used properly: clear objectives set at the outset, reviews held and recorded, and a decision taken before six months’ service is reached if the employee is not suitable. Managers who have been accustomed to dealing with new starters informally will need to document what they do. For employees beyond six months, the full process described above will apply, and the cost of getting it wrong will no longer be limited by a statutory cap.
The original proposal for day-one unfair dismissal rights accompanied by a statutory probationary period was dropped before the Act was passed, so there will be no separate light-touch regime for new employees. The six-month threshold is the only one that matters.
What Are The Alternatives To A Formal Process?
Not every performance problem needs to end in a warning or a dismissal. Where the cause is a lack of training or unclear expectations, addressing those may resolve the matter. Where the employee is in the wrong role, a move to a different one may suit both parties. Where the employee recognises that the job is not working out, an agreed exit under a settlement agreement can be quicker and less damaging for everyone than a prolonged capability process, and a protected conversation allows the employer to raise that possibility without the discussion being used against it later.
None of these alternatives removes the need to have the initial conversation, and none of them should be reached for as a way of avoiding it. They are options that become available once the problem has been named and discussed.
What Are The Most Common Mistakes?
The most common is delay. Problems that are raised early are small and usually fixable; problems that are raised after a year have become entrenched, and the employee can fairly ask why nothing was said before. The second is failing to record informal conversations, so that when the matter becomes formal there is no evidence of what was said or when. The third is setting improvement targets that are vague, unmeasurable or unrealistic, which makes it impossible to say whether they have been met. The fourth is treating the process as a formality to be completed on the way to a dismissal that has already been decided.
Each of these is avoidable, and each is far easier to avoid with advice at the start than to repair afterwards.
How Can GAP HR Help With Underperforming Staff?
We help employers manage performance from the first informal conversation to the final decision. That includes advising on whether the issue is one of conduct or capability, preparing for and, where helpful, supporting meetings, drafting the letters, improvement plans and records that a fair process requires, advising on disability and other protected matters, and handling settlement discussions where an agreed exit is the right outcome. We also help businesses put in place the probation and review procedures that the changes arriving in January 2027 will make essential.
There is no charge for an initial discussion and no obligation to take matters further. Call us now on 01491 598 600 or Click Here to Make An Enquiry and we will be delighted to help you.
