Australia: Pitfalls of performance management

Workplace Update
Last Updated: 26 July 2016
"Even where an employer has a valid reason to discipline or dismiss an employee, the employee may still succeed in an unfair dismissal claim if the performance management process is flawed."

In November 2015, Mark Cox and Nikita Barsby presented this topicto lawyers and human resources professionals at Legalwise's seminar: "Workplace Law -A Brave New World for Employers."

Trends in unfair dismissal cases suggest that a common pitfall for employers is failure to adopt a fair and proper procedure when managing underperforming employees.

Even where an employer has a valid reason to discipline or dismiss an employee, the employee may still succeed in an unfair dismissal claim if the performance management process is flawed.

Performance management is important to the success of any enterprise. Yet it can be fraught with risk of claims or complaints by employees, especially if mishandled (See our Employee Handbook and HR Guide products).

What Is Underperformance?

The test is not whether an employee is working at their personal best, but whether the work performed meets the needs of the business and the requirements of their role, considered objectively. A performance issue may also arise where the employee fails to observe an employer's policies, procedures or rules.

"It is important to ask the employee if there is an explanation or reason for their poor performance..."

Communication and documenting are crucial

The employee must be given a reasonable opportunity to understand what the performance issues are anda reasonable opportunity to respond to them. An employee should be warned that they are underperforming in a timely manner. There is no minimum number of warnings that must be given when managing underperformance. However, warnings are designed to put an employee on notice of their underperformance and to provide them with an opportunity to remedy the underperformance. The process should be documented, recording:

  • the aspects of the employee's performance that are below par;
  • the performance improvement plan and means of monitoring it; and
  • the warning that the employee's employment is at risk unless they meet requirements of their role.

What is the required level of performance?

Clear, measurable and reasonable performance targets must be set and clearly communicated to the employee. Active steps should be taken to assist the employee to meet the required level of performance, for example, training, counselling, mentoring, and or performance improvement plans.

Is there a reason for the underperformance?

Ask the employee if there is an explanation or reason for their poor performance, for example, personal illness or injury, lack of understanding of expectations, lack of training, or difficult personal circumstances.

How long should an employee be given to improve their performance?

There is no set timeframe that must be given to an employee to improve their performance. However, the timeframe must be reasonable in the circumstances of the particular case and needs of the business.

What if the employee has not improved?

Give the employee a genuine opportunity to "show cause" (ideally by way of a show cause letter) prior to any final decision to terminate their employment.

"Employers should not avoid performance management of ill or injured workers, but should adopt appropriate, fair and lawful strategies for doing so"

Policies and procedures

Policies and procedures should be in place to guide the process and ensure compliance with procedural fairness in the performance management process, and if used correctly, will mitigate the employer's risk of exposure to legal claims.

However, to limit the risk of exposure to breach of contract claims, performance management policies and procedures should not form part of the employment contract. This can be achieved with statements to that effect and carefully drafted policies, procedures and management guides.

llness or injury

Where personal illness or injury is a cause of the underperformance, consider what reasonable adjustments can be made to support the employee. Let the employee know that the employer wants to support them to reach the required level of performance while remaining clear, firm and consistent on what the required level of performance is.

Employers do not have to avoid performance managing ill or injured employees, but should use fair and lawful procedures for doing so. Employers should take care to avoid discriminating against employees by reason of illness or injury. The underperformance and illness or injury should be managed as separate issues.

"Approaching performance management in a careful and considered manner will increase the likelihood of a competent and lawful process being adopted.."


Approaching performance management in a considered way that is clearly communicated and documented throughout the process will minimise the risk of claims, and if claims are made the employer will be better placed to defend them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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