Performance challenges are amongst the most sensitive and complex people issues managers can face. Left unchecked, underperformance doesn’t just impact productivity, it erodes team morale, client outcomes, and organisational reputation. Yet, rushing into formal action without a legally sound framework can expose firms to unfair dismissal claims and costly tribunal awards.
This guide provides a practical, legally grounded toolkit that supports fair and effective performance management – from early identification to capability dismissals conducted inline with UK employment law.
Spotting the Signs Early: What Managers Need to Do
The first step in effective performance management is early identification. Performance issues rarely appear overnight; they often emerge gradually or through missed issues, declining quality, or recurring gaps against key performance indicators (KPIs). It’s essential that line managers don’t wait for annual reviews to raise concerns. Regular check-ins and documented feedback help build a transparent performance record.
Crucially, performance issues may have multiple underlying causes – ranging from unclear expectations and resource gaps to personal circumstances and health issues. UK guidance emphasises understanding why performance is slipping before deciding on formal action. Keeping thorough records from day one ensures there’s evidence to support future decisions.
Turning Concerns into Improvement: Drafting an Effective Plan
Once a performance concern is identified and discussed informally with the employee, the next step is to design a Performance Improvement Plan (PIP). A well-constructed PIP is a structural opportunity for improvement, setting out:
- Clear performance expectations with measurable objectives
- A reasonable timescale for improvement
- Support mechanisms such as training, mentoring, coaching, or adjustments to workload
- Criteria for how progress will be assessed
A PIP’s purpose should always be to help the individual reach the level required for their role. Failing to provide sufficient support or setting unattainable targets can undermine the fairness of the process if the case later reached an employment tribunal.
Regular review meetings throughout the improvement period are essential. These meetings should be documented and incorporated into the employees performance file. If progress is being made, confirm this in writing, and, if necessary, extend support. If not, make it clear – again in writing – where the gaps remain.
The Legal Dance: Do’s and Don’ts for Capability Dismissals
In UK employment law, capability relates specifically to a person’s ability to do the job – as opposed to conduct, which concerns behaviour. Capability dismissals are defensible only if the employer follows a fair and reasonable process.
Here’s how to protect your organisation legally:
DO:
- Follow a fair, staged process, starting with informal discussions, moving to formal PIPs, and culminating in formal warnings only where necessary. Tribunals look closely at whether the employee had a genuine opportunity to improve.
- Comply with the ACAS Code of Practice on disciplinary and grievance procedures – tribunals may increase compensation if the Code isn’t followed without reasonable justification.
- Give the employee the right to be accompanied at formal meetings by a colleague or trade union representative.
- Document every stage of the process with clear evidence – emails, meeting notes, performance data – so you can demonstrate legitimacy if the decision is questioned.
DON’T:
- Skip informal stages and launch straight into formal warnings unless performance breaches are exceptionally serious – dismissals without prior performance management are unlikely to be found fair
- Proceed with dismissal without exploring whether reasonable adjustments are required for health related performance issues – especially under the Equality Act 2010
- Ignore your own policies or apply them inconsistently across your workforce – inconsistency can be fatal in tribunal claims
Dismissal should always be a last resort, arrived at only after performance expectations and improvement opportunities have been clearly communicated and documented.
A Practical Checklist for Managers
Implementing capability procedures can feel overwhelming. Below is a straightforward step-by-step checklist that aligns with best practice and legal expectations:
- Identify concern early: document specific performance issues
- Hold an informal discussion: explore root causes and agree on immediate support
- Draft a PIP: set out expectations, timelines, support measures, and review dates
- Monitor progress regularly: keep written records of conversations
- Escalate to a formal meeting: invite, document, and offer the right to be accompanied
- Issue warnings if necessary: first a written warning, then a final one
- Consider dismissal only after reasonable attempts to improve: ensure all evidence supports the decision.
If you reach step 7, pause and review: have all earlier opportunities for improvement truly been afforded? Have you acted consistently and fairly? The strength of your documentation at this point can be decisive in defending the outcome.
Turning Guidance into Action
Managing underperformance isn’t just about ticking boxes…it’s about protecting your business, supporting your employees, and creating a culture of accountability. Navigating capability issues can be complex, and one misstep could lead to costly claims or reputational risk.
This is where our legal expert guidance makes the difference. With a tailored approach, you can:
- Ensure your performance improvement plans and capability procedures comply with UK law
- Support managers with practical, step-by-step tools to handle underperformance fairly and effectively
- Confidently move through the process, including formal warnings or dismissals, while mitigating legal risk
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By partnering with legal specialists, you’re not just following the law, you’re creating a framework that strengthens your organisation and empowers your people. Capability issues are challenging, but with the right guidance, they can be managed confidently, consistently, and successfully.
Don’t leave performance management to chance. Get in touch with our team today to review your processes, ensure compliance with UK law, and equip your managers with the tools they need to handle underperformance confidently. Schedule a consultation now and turn capability challenges into opportunities for growth and consistency.