Employment law

How to handle low performing employees

Performance management is crucial for maintaining and improving your business performance through the quality of your employees’ performance. If your workforce isn’t performing duties to standard, there are steps you can take to rectify this and motivate employees by following the capability procedure. If you’re dealing with low performing employees speak to an expert employment lawyer.

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What is the capability procedure?

It’s good practice for employers to deal with poor performance or capability issues under a specific policy or procedure. The ACAS Code of Practice on Disciplinary and Grievances applies to poor performance issues and should be followed by employers when dealing with capability issues. A failure to follow the ACAS code on can lead to an Employment Tribunal increasing an award for unfair dismissal to an employee by up to 25%.

The purpose of a capability procedure is to address concerns regarding an employee’s performance and consider ways in which you can work together to improve performance to an acceptable level. It can also be a good opportunity to consider whether an employee would benefit from any additional assistance, training or changes that might assist them in improving their performance.

What steps should be followed in a capability procedure?

Below are the main steps that you should normally follow under a capability procedure.

Initial assessment or investigation

In the first instance, performance issues should be dealt with informally as part of day-to-day management.

If this isn’t successful, an investigation involving reviewing the employee’s personnel file, monitoring their work and, if appropriate, interviewing the employee about their performance should then follow.

You should hold several meetings to discuss performance and ways to improve it and set targets for improved performance. The employee should be provided with the findings of any investigation and an opportunity to comment on them at any formal capability meeting that follows.

Invite the employee to a capability meeting

If you do decide to take formal action under any capability procedure, you should write to the employee setting out the concerns regarding their performance, the reasons for those concerns and invite them to a formal capability meeting to discuss the situation.

The letter should explain the likely outcome if, following the meeting, you decide that their performance has been unsatisfactory, and you should include any relevant documents that are to be considered.

The aim of the meeting is to:

  • Clarify the required standards the employee has failed to meet
  • Allow the employee to ask questions, respond to evidence and put forward their own evidence and views
  • Establish the likely reasons for any poor performance
  • Identify what can be done to assist the employee in improving their performance, such as additional training or supervision
  • Set targets for improvement and a timescale for review
  • An employee has the right to bring a companion to any formal capability meetings. This can be a colleague or a trade union representative (if applicable)

You should communicate your decision in writing as soon as possible after the meeting.


If you decide that the employee’s performance is unsatisfactory, you may give a written warning. If performance has fallen seriously below the required standard, you may decide to go straight to a final written warning, rather than a first written warning. However, it’s good practice to give an employee at least two warnings and therefore two opportunities to improve, before any dismissal for poor performance.

The written warning should set out:

  • The areas in which the employee’s performance has fallen below required standards
  • Targets for improvement and the timescale in which improvement is required (the review period)
  • Any additional measures you’re going to take to assist in improving performance, such as additional training or supervision
  • How long it will remain live on the employee’s personnel file, after which it should be disregarded

Review period

How long the review period should be will depend on the nature of the poor performance, the needs of the business and what would be reasonable in the circumstances. A failure to give a reasonable length of time for improvement can make any dismissal that follows unfair. Performance should be regularly monitored during the review period.

If you’re satisfied with the employee’s performance at the end of the review period, the employee should be informed that no further action will be taken. However, if you’re still not satisfied, a further capability meeting should be arranged in the same way as for the initial capability meeting.

Further capability meetings

At the second capability meeting (and any subsequent meetings) the employee will have the same rights as at the first meeting, including the right to bring a companion.

The focus of the second meeting will usually focus on the extent to which the employee’s performance has improved over the review period and if it has not improved to a satisfactory level, the reasons for this and whether anything further can be done to assist them. A further period of review and further objectives may be agreed at the meeting, or these may be notified to the employee after the meeting in the outcome letter.

Final warnings

Following the second meeting, if you decide that the employee’s performance has not improved as required, you may decide to give a final written warning.

A final written warning should typically set out:

  • The areas in which the employee has continued to not meet required performance standards
  • Targets and timescales for improvement
  • Any measures, such as additional training or supervision, which will be taken to assist in improving performance
  • The consequences if the employee fails to improve to the required standard within the review period, or of further unsatisfactory performance within the period in which the final warning is active

A final written warning will normally remain active for six to 12 months. After that time, it may remain on the employee’s personnel file but should be disregarded in deciding the outcome of future capability proceedings.


Capability is one of five potentially fair reasons that are permitted under the law to terminate someone’s employment. If the employee doesn’t meet the further targets you’ve set within the time frame specified, further action should be taken and this might include dismissal.

If an employee is dismissed for performance reasons, then they would be entitled to notice pay (perhaps being paid in lieu, though it’s worth seeking advice on this if there’s no contractual right to pay the employee in lieu as this might render any restrictive covenants unenforceable) and any accrued but unused holidays up to their last date of employment.


Employees should be given the right to appeal any decision or warning they’re given under the capability procedure. Ideally, a different and more senior manager than that issuing the warning or decision should deal with any appeal.

Medical issues and disability discrimination

If you’ve any reason at all to suspect that performance issues may be connected to a medical condition, it’s advisable to obtain a medical report on the employee’s condition from a suitably qualified individual. This should assist you in understanding the employee’s condition, the impact it has at work and any steps or measures that you can take to help that person to perform to the required standard.

You should not make any decision under the capability procedure until you’ve had the opportunity to review and consider the contents of any medical report. Ideally, the report should be available before the first capability meeting takes place, although this may not be possible in every case.

Under the Equality Act 2010, a person is disabled if they have a physical or mental impairment that has a long-term substantial adverse effect on their ability to carry out normal day-to-day activities. To be "long term" for the purposes of the Act, the individual's condition needs to have lasted for at least 12 months, or be expected to last 12 months or more.

If the employee is disabled, you may have a duty to make adjustments to address any substantial difficulties caused by workplace arrangements. However, this would depend on what’s reasonable in the circumstances and whether any adjustment would make a material difference in assisting the employee in overcoming those difficulties. This could include changing the employee’s duties and/or giving additional training, or making adjustments to the capability procedure itself, such as holding meetings at the employee’s home if attending a meeting at work is difficult.

To avoid a disability discrimination issue arising, you should consider whether any adverse action you take against a disabled employee as a result of poor performance, including dismissal, can be objectively justified. This means that as an employer you have to be able to show that you’ve a legitimate aim (such as meeting productivity targets) and that you've acted proportionately in the way you’ve treated that employee.


It’s worth considering in some circumstances whether it would be preferable to offer the employee a settlement agreement as an alternative to going through the capability procedure.

A settlement would ordinarily involve you paying the employee a financial settlement in return for an agreement that the employment will end and the employee will not bring any claims. The terms of the agreement reached will be recorded in a written settlement agreement.

Please note that there are specific rules about how discussions on settlement must be conducted exists, such as the manner of the discussions and the time-frames that employees should be allowed to consider any proposals. Employees must also receive advice from an independent legal adviser before any settlement would become binding.

If you need advice or assistance drafting a capability procedures our team of specialist employment lawyers are here to help. Contact us or call us on 0330 041 5869.

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