Australia: Appropriate performance management crucial for businesses dealing with underperforming employees

Last Updated: 21 October 2015
Article by Rebecca Byun

Most Read Contributor in Australia, September 2017

Performance management makes perfect business sense where you have an employee who would clearly benefit from some guidance and management.  However, is it really that important where the employee's under-performance has been ongoing and is unlikely to improve?  

This is a reasonable question that businesses may ask, particularly in today's financial climate.  Performance management takes time and resources, and it may or may not result in the required level of improvement.  It may be especially difficult to justify where the employee's under-performance is dragging down the performance of other staff and the office morale, or is affecting the business of your clients. 

However, to skip the process altogether and proceed to dismiss the under-performing employee is a risky move.  Here's why.

1. Skipping performance management leaves your business exposed to various employee claims

Recent data continues to show that the majority of claimants coming before the Fair Work Commission are individuals disputing the termination of their employment.  This comes as no surprise as employees today are more aware of and vigilant with their rights. And mostly, employee claims are easy and inexpensive to commence. 

The highest risk group will be employees who are eligible to make an unfair dismissal claim. The claim would most likely be that their dismissal was harsh, unjust and unreasonable as they weren't given an opportunity to respond or improve their performance and/or conduct. In this context, a decision not to undertake performance management can be fatal to defending this type of claim. 

However there are also other claims. An employee may make an adverse action claim - i.e. "My dismissal was unlawful because one of the reasons for dismissing me was because of some protected trait or workplace right".  An employee who feels their dismissal is unexplained is more likely to seek to associate their dismissal to some unlawful reason.  It is less likely for an employee who has been shown clearly through an objective performance management process that there was a legitimate reason and it was nothing personal. 

2. Any savings that may have been made may be outweighed by the costs of recruitment and defending claims

The business may make some initial savings from not having to invest any further time and resources into the employee. However, the time, costs and resources you will then need to commit towards recruiting and training someone new for the job may ultimately cancel out those savings. Add to this any costs and time for defending any claims and you may find that it has cost your business much more in the longer term. 

3. The cost of underestimating an under-performer and overestimating the burden of performance management

The remaining value of an under-performing employee should not be overlooked for business productivity.  An under-performing may still have a valuable understanding of the business and skills that can still be utilised, albeit with some necessary guidance.  Considering the costs and time lost for the business in termination, recruitment and training, it may still be worth reconsidering their value.

And let's kill one myth of performance management once and for all – unless you have committed the business to this process in a policy or contract, there is no "three strikes" rule or a set minimum period for a performance management process.  The process of managing an employee's performance needs to be determined on a case by case basis. It will depend on factors such as the degree of under-performance, the nature of the required level of skills or performance, the extent to which the underperformance is impacting others including staff and clients and whether the employee has already been made informally aware of their performance issues.

So, is it really that important that your business undertakes a proper performance management process?  In most cases, the answer will be a resounding yes.  There is an abundance of cases where the Fair Work Commission has found that employers should have dealt with performance issues more adequately through performance management before proceeding to dismissal. Some more recent examples of successful claims against employers involve:

  • a bus driver who was dismissed without performance management for leaving a bus stop earlier than required, using his mobile phone while the bus was not parked and reading while driving the bus1;
  • a tram driver who was dismissed for serious misconduct being deliberately driving slowly to delay the tram service. The Fair Work Commission rejected that this was a valid reason for dismissal and ordered that the employee be reinstated.  Despite the employer's claim that the employee's performance could not be improved, it was found the employer had failed to warn the employee about their performance which could lead to their dismissal2; and
  • an employer who adopted an improper approach to commencing performance management.  The employee in question used inappropriate language in an exchange with his manager on his first day and appeared to get off on the wrong foot with his manager. The manager sought to commence a performance management process, however advised the employee that "it's not very pleasant and I don't recommend it for anyone".  The Commissioner found that the employee had been constructively dismissed and had been unfairly dismissed ordering damages against the employer3.

Each employee scenario has its own set of complex and nuanced factors the business must consider.  However, what these decisions show is that even if there may be genuine performance or conduct issues, the Fair Work Commission will likely find against an employer if the employee has not first been given an opportunity to improve through performance management.

With all this in mind, it is at the very least worth reconsidering the question and making sure you are aware of and prepared for the risks that your business may become exposed to before you skip the performance management process.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.