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Performance Management

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Performance Management Overview

Performance Expectations

Any employee in any role at any level will have a certain standard of performance that is reasonably expected of them by their employer.

Appropriate management of the performance of employees should be regarded as an ongoing requirement of effective day-to-day management. This should be through continuous evaluation and assessment of performance, appraisals, identification of any learning and development or training needs and allowing for a two-way dialogue about the expectations of the employer. Some employers see performance management as a process that kicks in only when performance is clearly below the required standard, however, often by the time matters reach this point, damage has been done to the relationship which could have been avoided by a more pro-active approach at an earlier stage. All employers are different and therefore should develop a performance management practice that best suits the particular business, for some useful HR best practice see Performance and Personal Development – HR Guide [FS7.04] and Carrying Out Effective Performance Appraisals – HR Guide [FS7.05].

One of the most important aspects of performance management is to set and communicate appropriate and reasonable expectations of performance. What is appropriate and reasonable will depend entirely on the individual and the role they have been employed to perform. Probation periods are useful when an employee is new to the role as this may allow the employer to assess whether or not minimum requirements can be met by that employee. See Probation Periods Overview [FS6.01].

Inevitably there will be cases (even following appropriate informal management) where performance falls below the standards required by the employer, in such cases it may be necessary to consider formal action.

Conduct or Capability?

It is important for employers to understand the difference between misconduct issues and capability issues, and take appropriate steps accordingly. Misconduct is generally a deliberate act or omission but can also include carelessness, negligence or lack of effort or application. The key point to look for is whether or not the behaviour is within the control of the employee. Misconduct cases are appropriately dealt with under a disciplinary procedure (see Disciplinary and Misconduct Overview [FS5.01]).

Where an employee’s performance is unsatisfactory but this is due to a genuine capability issue (for example they do not have the skill, aptitude, health or other physical or mental qualities to do the job) the disciplinary procedure may not be appropriate. Please see the separate fact sheet Sickness Absence and Ill Health Overview [FS3.01] for capability issues related to ill health capability.

This fact sheet is intended for use in capability cases where performance/competence is the problem.

Fair Dismissals

Capability is a potentially fair reason for dismissal under section 98 of the Employment Rights Act 1996. An employee with at least 2 years’ continuous service with their employer will be able to claim unfair dismissal in the Employment Tribunal if they have been dismissed unfairly. An employer defending a claim for unfair dismissal will need to be able to show that:

  • The principle reason for the dismissal falls within one of the categories of potentially fair reasons for dismissal (conduct, capability/qualifications, redundancy, breach of statutory duty or restriction, some other substantial reason);
  • The employer acted reasonably in all the circumstances in treating the reason as sufficient to justify dismissal, including the requirement to adopt a fair procedure before taking the decision to dismiss. This is often known as the range of reasonable responses test.

The above illustrates the importance of following a fair procedure, an otherwise fair dismissal can be held to be unfair due to procedural errors alone. For further information on what constitutes a fair performance capability procedure see Managing Poor Performance Issues [FS7.02] and Performance Management Policy [P7.01].

In the context of dismissal for capability reasons, the tribunal will not only want to be satisfied that the employer honestly believed, on reasonable grounds, that the employee was incapable of performing their job to the required standards but, with regard to the overall reasonableness of that decision, will consider whether management failed to discharge its own responsibilities towards the employee. An important element of this will be the extent to which the employer has clearly communicated the requirements of the role to the employee or, where applicable, has provided necessary support and training.

Generally, case law has established that a dismissal for poor performance will not be fair unless the following key elements are present:

  • A proper investigation into the problem has taken place.
  • The employee has been made aware of the problem and been given an opportunity to improve within a realistic timescale.
  • The employee has been provided with appropriate support and/or training.
  • The employee's progress is reviewed during the review period.
  • The employee is offered a right of appeal against the decision to dismiss.

Where an employee has insufficient service to be able to bring a claim for ordinary unfair dismissal, an employer may decide to accelerate a dismissal by following a reduced performance capability procedure (see Dismissing Short-Serving Employees – Poor Performance [FS7.03]). This is a commercial decision and should be made only after an analysis of the risks and taking legal advice. The fact that an employee has insufficient service to claim ordinary unfair dismissal does not mean that the dismissal is necessarily low risk as other claims without qualifying service requirements (such as automatic unfair dismissal claims, whistleblowing or discrimination) may be possible.

Performance Capability Policies, Procedures and Rules

One of the key ingredients for a fair performance capability procedure is for the employee to have been aware (or be reasonably expected to be aware) of the performance standards expected of them. It is good practice to include performance rules and expectations as part of an induction process for any new employees.

Some employers have detailed written performance standards and requirements that they apply to each role within the organisation, these will be targeted and specific to the level and requirements of the role. Other employers have a one size fits all procedure which allows the manager to set the performance expectations in any given set of circumstances. Either approach is fine provided the standards are reasonable, measurable, communicated to the employees and applied consistently.

For a template general policy see Performance Management Policy [P7.01].

The ACAS Code

The statutory ACAS Code of Practice on Disciplinary and Grievance Procedures was introduced in April 2009. The Code is supplemented by a non-statutory guide called Discipline and Grievances at Work, The ACAS Guide. Both the Code and the Guide are available from ACAS - www.acas.org.uk.

The ACAS Code applies to “disciplinary situations” which includes misconduct and poor performance. Whenever an employer is considering dismissing an employee due to performance capability they should consider the ACAS Code as any Tribunal will expect to see that the provisions of the Code are followed when determining whether or not a fair procedure has been applied. Further, if either party unreasonably fails to follow the Code it can affect compensation. Depending on fault, the Tribunal may either increase or reduce the employee’s compensation (if any) by up to 25%.

Statutory Right to be Accompanied

All workers have a statutory right to be accompanied to disciplinary hearings and this includes hearings under performance capability procedures where a formal warning or other sanction may be imposed or confirmed (appeal hearings). They can choose to be accompanied by either a fellow worker or trade union representative.

See The Statutory Right to be Accompanied [FS5.03] for further information on this right.

See also the template Guide to the Role of the Companion [TP5.01].

 

This document has been created by, or on behalf of ESP Ltd, as a general document and as a guide in relation to its subject matter and has not been bespoke drafted for you or the specific circumstances in which you are looking to use it. Prior to using this document and undertaking any HR process you must consult your organisation’s own policies and procedures to ensure that you do not do anything in conflict with your own policies and procedures.  If in any doubt as to how to use this document or, if you require any legal advice, please feel free to contact ESP Ltd on 0333 006 2929 and our legal team will be more than happy to assist.  ESP Ltd will not be liable in any way for any actions undertaken by you or your use of this document unless we have been consulted regarding your use of this document as legal advisor to your business or have bespoke drafted any documentation in response to a specific support request.