Poor performance dismissal feature. Under performing employees are a drain in a company, but how do you go about dismissing them fairly?

Employment solicitor Katy Jones of Keystone Law reminds employers how to fairly dismiss someone for poor performance.

On 21 May, 2012 the government published a controversial report by Adrian Beecroft (a venture capitalist) on possible reforms to employment law, including radical changes to unfair dismissal law.  Mr Beecroft came up with the notion of a "compensated no fault dismissal" which would allow an employer to dismiss an employee without giving a reason provided they make an enhanced leaving payment, equivalent to a statutory redundancy payment. In his report Mr Beecroft said that the "change would be that the onus would then be squarely on the employee to perform well enough for the employer to value them as an employee”.

However the law has not yet changed.  Until it does, here is a reminder of the process for performance-related dismissal.

Performance-related dismissals

To defend an unfair dismissal claim brought by an employee dismissed for performance reasons, the employer will have to show that it honestly believed on reasonable grounds that the employee was not doing the job to the requisite standards and that the employer acted fairly. Employers should follow their own disciplinary or capability procedure, if they have one. Employers should also have regard to the ACAS Code of Practice on Disciplinary and Grievance Procedures: The ACAS Code is a very sensible and clear document and one which employers can easily use. Where the employer has failed to have regard to the ACAS Code, employment tribunals have a power to increase an employee's unfair dismissal compensation by up to 25 per cent.

Preparation

Before commencing a formal procedure, the employer should check the employee's:

• job description and contract of employment to see how their role has been defined;
• contract of employment and the applicable procedure to see what they say about how performance issues will be handled;
• CV and any references on their personnel file to see if they seem to have the necessary skills and experience to perform their role; and
• appraisals to see what has previously been said to the employee about their performance.

Collate as much data as possible in order objectively to test the judgment that the employee is in all the circumstances under-performing. When doing this, the employer should also check the equivalent data in relation to similar employees, to ensure that it can justify taking action in respect of one employee but not another or others. Consider whether the employee has been properly managed and whether there may be any reasons for the under-performance, such as domestic problems.

Formal process

If an employer does not have their own disciplinary or capability procedure, a formal disciplinary process could commence as follows: 

1. Prepare as outlined above.
2. Give the employee a letter inviting them to attend a disciplinary meeting:

• the letter should explain the alleged shortcomings and, if possible, include evidence. The letter should also mention the employee's right to be accompanied by a work colleague or trade union representative;
• the employee should be given sufficient advance warning of the meeting to prepare for it - ideally five to seven days' notice;
• and if the employee or their preferred companion cannot attend on the chosen date, try to re-schedule the meeting.

3. During the meeting a proper and full discussion should take place of the employer's concerns regarding the employee's performance. The employee is allowed to state their case and put forward any mitigating circumstances.

4. The disciplinary decision is made either at the end of the meeting or shortly thereafter, for example if the manager chairing the meeting needs time to think about things or investigate points raised by the employee.

5. A first written warning is given. It should explain the shortcomings and set out the improvements that the employer is looking for and say that the employee's performance will be kept under review for a specified period (with regular review meetings throughout) and that further disciplinary action may be taken during the review period if the employee fails to achieve and sustain a sufficient improvement in their performance. The length of the review period needs to be reasonable and that will depend upon the circumstances of the case. Typically a reasonable review period will be three or six months. The warning letter should specify how long the warning will be "live" for. In the absence of a provision in the company's disciplinary procedure specifying how long warnings should last, I suggest a first written warning should be stated to last either six or twelve months.

Except in the case of gross negligence, an employee should be given two warnings before being dismissed on capability grounds.

Work-related stress

It is quite common for an employee who is being performance-managed to go off sick with work-related stress. If this occurs, the absence should be actively managed by the employer. The employer should check how much sick pay the employee is contractually entitled to. Once the employee has exhausted any contractual entitlement to sick pay, the employer may be advised just to pay statutory sick pay going forward, in order to encourage the employee to return to work.

If the sickness absence continues for more than a couple of months, the employer may wish to consider sending the employee for a medical examination with a psychiatrist nominated by the company. Independent psychiatric reports can be very helpful in dealing with stress absences. Relying on reports from the employee's own doctor is rarely satisfactory.

Short service employees

Employees who started working for their employers before 6 April, 2012, need one year's employment before they can bring an unfair dismissal claim; or two years if they started on or after 6 April, 2012. Even so a dismissal will be automatically unfair if:

• it’s for a reason connected with age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation, pregnancy or maternity leave, or because they are a whistleblower or have been involved in trade union activities.