Employers have a right to expect their employees to carry out their duties according to set standards; however, properly managing expectations is critical to help minimise workplace issues
This article provides information to help employers manage poor performance fairly and effectively. The material is general only and does not constitute legal advice. Australian workplace law is subject to change, and it is essential to seek current legal advice relevant to your circumstances.
What is Poor Performance?
Poor performance involves more than an occasional mistake or off day. Depending on the circumstances, examples of poor performance might include:
- Failure to meet objectives: Not achieving set targets or goals (for example, sales quotas, project deadlines).
- Poor quality of work: Producing work that is frequently inaccurate, substandard, or requires constant correction.
- Failure to follow reasonable instructions: Not carrying out directions related to the job.
Poor Performance or Misconduct?
When addressing employee performance issues, employers should first distinguish between poor performance and misconduct, as managing each of these issues generally requires a different approach. For example, serious misconduct (theft, fraud, violence, or serious breaches of work health and safety obligations) may justify immediate disciplinary action, including possible summary dismissal. Underperformance, on the other hand, typically requires a process focused on improvement first.
The Importance of a Fair Process
The core principle in managing poor performance is fairness. If you decide to end a person’s employment due to their performance, you must be able to demonstrate that you followed a fair process. If a fair process isn’t followed, an eligible employee may succeed in an unfair dismissal claim before the Fair Work Commission.
What is ‘fair and reasonable’ is assessed case‑by‑case and might include consideration of the size and resources of the business, the employee’s length of service, whether the employee is covered by an award or enterprise agreement, and any relevant workplace policies.
A fair process generally involves key steps, such as:
1. Clearly identify the problem and set expectations
An employee cannot fix a problem they don’t know exists. Be specific about what the poor performance is and why it is a problem.
- Use facts, not opinions: Avoid general statements like, “You’re lazy”. Alternatives might be, “Your sales figures for the last three months are 20% below the required target of X”; or “the last five reports you submitted contained an average of four significant errors”.
- Communicate expectations: Clearly state what the employee needs to do to meet the required standard. Performance expectations should, as far as possible, be linked to the employee’s position description, contract, key performance indicators, and any applicable award or enterprise agreement obligations.
- Document everything: Keep a detailed, written record of the dates, times, communication and specifics of the performance issue.
2. Provide support, training, and time to improve
A performance management process isn’t about punishment but giving the employee a genuine opportunity to improve.
- Offer support: Ask the employee what they think might be hindering their performance. Do they need additional training, new tools, or clearer instructions?
- Create a Performance Improvement Plan (PIP): A PIP sets out the specific areas for improvement, the necessary steps, the resources required, and a reasonable timeframe, which can vary. A period of 4-6 weeks may be reasonable, but there is no set timeframe. What matters is that the employee is given a reasonable opportunity to improve, which could depend on the role, the extent of the concerns/deficiencies, the business, and how quickly improvement could realistically be achieved.
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- The employee should be advised in writing of the support and training to be provided, with any reasonable adjustments considered for disability or health issues, where relevant.
- Employers must also follow any processes contained in policies, contracts, awards or enterprise agreements.
- Regular check-ins: Meet with the employee frequently (i.e., weekly) during the PIP period to provide feedback, encouragement, and assess progress. Document these meetings.
3. Formal warnings and final decisions
If the employee’s performance does not improve after the initial support and the timeframe has passed, the process becomes more formal.
- Formal warnings: In many cases, it will be appropriate to issue one or more formal written warnings before considering dismissal. Describe the ongoing performance concerns and refer to earlier discussions and the PIP. State the improvement required and by when. Explain that ongoing underperformance may lead to further disciplinary action, including termination of employment.
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- Multiple warnings may be warranted, but what is reasonable will again depend on the circumstances (type of role, seriousness and duration of underperformance, prior history, and any award/enterprise agreement or policy requirements).
- If an unfair dismissal claim is made, the Fair Work Commission considers whether, in all the circumstances, the employee was clearly warned and given a reasonable chance to improve.
- The final decision: If the performance still does not meet the standards after the final warning period, you may want to dismiss the employee. Legal advice is strongly recommended when considering this step and before proceeding with the dismissal. The employee must be given the reason(s) for the dismissal and allowed to respond to allegations of poor performance (in a meeting and with a support person, if they wish) before a final decision is made.
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- The decision‑maker should genuinely consider any response from the employee, including any mitigating factors (health, personal issues, workload, unclear instructions, or lack of training), before deciding whether dismissal is appropriate or whether alternative measures (such as redeployment or extending the PIP) are more suitable.
Small Business Dismissal Code
For small business employers (businesses with less than 15 employees), compliance with the Small Business Fair Dismissal Code is critical if the employer wishes to rely on the Code in defending an unfair dismissal claim.
Key Takeaways for Employers
- Be clear and specific: Performance feedback must be based on objective facts and measurable targets, not subjective feelings. It should be tied to position descriptions, KPIs and any relevant policies.
- Document everything: Keep detailed records of all meetings, warnings, the PIP, and any support or training provided. This includes notes of meetings where the employee is given a chance to respond and consideration of their explanations.
- Give a fair go: Provide a genuine, reasonable chance for the employee to improve, along with the necessary support and a clear timeframe.
- Allow a right of reply: Before any final decision, the employee should be given the reason for the proposed dismissal and allowed to respond, ideally in a meeting held with reasonable notice and the option of a support person.
- Ensure warnings are formal: Warnings must be written, clear, and labelled as formal disciplinary warnings and state the risk of the employee losing their job.
- Seek legal advice: Workplace laws are complex, and this information should not be considered legal advice. The steps required in managing poor performance may vary depending on different factors. Employers considering dismissing an employee due to poor performance should seek legal advice. Getting it right from the start helps protect your business from costly and time-consuming claims.
If you or someone you know wants more information or needs help or advice, please call (02) 5127 5261 or email [email protected].