How to Manage an Underperforming Employee

You might have an employee who is underperforming in their role and this is having an impact on your business. It could be lack of skills and knowledge, a misunderstanding of expectations or a poor attitude. Are you wondering how you can dismiss this person respectfully, and more  importantly, legally?

Dismissing an employee for underperformance is more complex than terminating employment for inappropriate behaviour, fraud or theft.

Three Strikes

There’s a common misconception that a “three strikes and you are out” policy is how performance based dismissals are managed.

However, while this is a common policy to follow, it is by no means a hard and fast rule.

You do not have to give an employee three warnings, or even one warning but you should give the employee the opportunity to respond and reasonable support to improve.

While you may have a valid reason to dismiss an underperforming employee, if you don’t follow procedural fairness you can end up in hot water in an unfair dismissal case.

When underperformance is identified

Let’s take a closer look at what you should do when you have identified an employee is underperforming, you see no room for improvement, and you think that it is time for them to leave the business.

When underperformance is identified, the immediate supervisor/manager is required to set up a meeting with the employee to discuss areas of concern in unsatisfactory work performance or conduct.

Allow the opportunity for a support person to be available if the employee wants someone and provide the employee during the meeting with an opportunity to respond to the identified areas of concern.

During the meeting, advise the employee on the nature of the improvement required and the time within which reasonable improvement is expected.

The employee should provide suggestions of how they are going to improve and if required, with their supervisor/manager they should set and sign off on a development plan with achievable objectives and reasonable timeframes for improvements to occur.   

During the meeting make it clear that if their performance or conduct doesn’t improve, likely consequences can include dismissal.

Monitor the work closely and communicate frequently with the employee. The employee is to be provided with every reasonable opportunity and assistance to address underperformance, be updated on how they are progressing and where they are still not meeting expectations.

If the underperformance or conduct continues or comes up again then you need to take further action in a timely manner.

The quicker you take action, the faster it will be resolved. You may decide to repeat this process on a number of occasions and if after reasonable attempts the employee hasn’t improved, you can then terminate their employment.

Making the tough decisions

On some occasions the employee may realise they can not match the requirements of the job and tender their resignation before further action is required.

If the employee doesn’t decide to leave, it will be up to you whether you want to keep the employee on and how many chances you give them.

Whatever you choose to do, make sure you document the process, including all conversations about the matter. That way you have the evidence of what transpired if the employee attempts to say that their dismissal was unlawful.

Contact Small Business Society for our performance management checklist and the next steps regarding an underperforming employee or any behavioural issues. 

The information provided in this document is for your guidance only and is general in nature. It does not constitute as legal advice. It is the responsibility of the individual to seek legal advice where required.


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About Kate Tongue

Kate Tongue is the founding Director of Small Business Society.

She is a qualified and experienced Human Resources professional with more than 10 years of experience across the private and public sectors.

Her particular interest and experience is in managing the employee life cycle, delivering process improvements, and Human Resource strategy.


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