By Amanda Curatore & Vaughan Granier

When the performance, conduct, and achievements of your employees dictate the success of your business, you need to ensure that they’re doing their best work.

So, what do you do if an employee is under-performing and not meeting expected standards? We would all rather reap the benefits of helping an employee to succeed, but sometimes, despite our best efforts, we’re left with only one option – termination. Getting to that place is not as simple as you might expect and requires a careful process. To ensure you’re acting in accordance with employment laws in this situation, I recommend you follow the guideline I have provided in this article.

Following these steps will mitigate risk for your business if you decide to terminate an employee for poor performance. Better yet, this process may resolve the performance issue without the need for termination.

Step 1: The informal chat

Have a chat to your employee. Often, an employee may not be delivering work to the full extent of their ability due to a miscommunication, misunderstanding their instructions, a workload that’s already at full capacity, or they may be going through a crisis in their personal life that’s taking their mind elsewhere.

In this initial informal discussion, you have the opportunity to identify specific areas requiring improvement and whether the employee requires any guidance or additional assistance to meet their work expectations.

Sometimes, seeing the problem from your employee’s perspective can lead to discoveries around inefficiencies and system/equipment problems that can make a positive difference to the workplace when corrected.

Having this informal discussion with your employee about why they are not performing to the appropriate standard (and what needs to change for them to produce quality work and reach goals), is often all you need to do to bring about the change you need.

(Just a note, even though it’s informal, it’s wise to make a written note e.g. in your diary, of what was said and why. You may need it later if your employee disputes the conversation or denies any knowledge of the problem)

Step 2: The formal discussion and Performance Improvement Plan (PIP)

If the informal discussion fails to improve your employee’s performance, you’ll need to have a more formal discussion. Set up a formal meeting where I strongly recommend you investigate the issues more fully, and if necessary, issue your employee with a formal Performance Improvement Plan (PIP).

The purpose of the PIP is to support your employee to ensure they’re able to meet business expectations. A PIP is a formal and strict plan which outlines clearly:

  • how the employee is currently performing,
  • what goals and standards the employee is required to meet and where the performance gap lies;
  • how the employee can achieve these goals;
  • what time frame will be given for the achievement of these improvements; and
  • what support mechanisms will be available to assist the employee in this process. This may include the business offering additional training, if necessary.

Throughout the PIP process, you should have regular interim meetings with the employee to ensure they are on the right track. At each meeting, if the employee is not meeting the agreed outcomes, you should warn them of the consequence if they don’t achieve the performance goals by the end of the PIP time-frame (which is that they are likely to be terminated).

If you then get to the end of the agreed timeframe for the PIP, and the required outcomes have not been achieved, this is when you turn to step 3.

Step 3: The formal performance hearing

If the employee’s performance still hasn’t improved sufficiently, you may start a formal performance hearing. Before inviting the employee to the hearing, it’s best practice to give them a written letter outlining:

  • the venue date and time of the meeting (remembering to give at least 24 hours’ notice of the meeting)
  • details of why the meeting is happening (refer to the formal written PIP)
  • the opportunity to bring a support person to the meeting if they wish.

At the formal performance hearing, the following are essential steps:

  • Make sure the employee understands their rights under employment law
  • Go through the history of the matter, showing the employer perspective on the performance issue.
  • Use the Formal PIP as important evidence of the employees understanding and agreement to the process
  • Listen to the employee’s explanation of the situation and the reasons why the outcomes were not achieved
  • Decide if the reasons are worthy of an outcome less than termination. (Remember, the strong possibility of termination has been “on the table” since the start of the PIP)

Once you’ve completed these essential steps you can progress to the following actions:

    1. Written Warning :  If you feel that the employee has made significant progress and will shortly achieve the desired outcome, you may wish to end the PIP but still place them on notice that the process is not completed; and achievement of the goals is still required.
    2. Extend the PIP:  Where an employee has made some progress, but not sufficient to vindicate them entirely, you could extend the PIP for a longer period. I recommend this step if you feel it might result in the improvements you require. Make sure your employee understands that failure to achieve the performance expectations at the end of this extension will probably result in termination.
    3. Termination: If the previous warnings have been clear that failure to achieve performance goals will result in termination, it is possible, as a result of the performance hearing, to terminate the employee. To be sure that this follows a good faith process and is a last resort, you should be sure that the employee has either:
      • already received a final written warning for performance;
      • has had sufficient warning during the PIP
      • The PIP was reasonable and fair with regard to time frames, support and guidance, and that any other agreed company commitments have been met.
      • The nature of the employee’s performance justifies the termination of his or her employment;

Generally speaking, before having their employment terminated, an employee should have had several opportunities to improve their performance. This mitigates the risk of an unfair dismissal claim which can occur if you were to terminate your employee without the opportunity to improve. These steps can also help employees to become more capable and avoid termination, a win for your business and your employee.

What should you put in a warning letter?

When you issue an employee with a written warning, you need to outline:

  • the nature of the employee’s unsatisfactory performance;
  • the improvement that was required and not achieved;
  • the performance that must now be achieved and by when;
  • a date when you will next review the employee’s performance; and
  • the consequences should they not achieve what’s expected of them.

No approach to managing performance will be the same, save that termination should be a last resort. While the approach you take should be based on the nature of the issue and the individual, if you follow the process I’ve laid out you’ll be giving your employee every chance to improve and reducing the risk to your business. You’ll also be recognised by the people you work with as a firm, constructive and fair employer.

Give your employee the necessary help and support to get back on track, and your poor performer might even turn into your star performer!

Termination is a last resort

No approach to managing performance will be the same, save that termination should be a last resort. While the approach you take should be based on the nature of the issue and the individual, if you follow the process I’ve laid out you’ll be giving your employee every chance to improve and reducing the risk to your business. You’ll also be recognised by the people you work with as a firm, constructive and fair employer.

Give your employee the necessary help and support to get back on track, and your poor performer might even turn into your star performer!

Amanda Curatore is a qualified senior workplace relations consultant at FCB Group and HR Assured, where she provides daily advice and support to businesses of all sizes on HR issues ranging from the simple to the absurdly complex.

Vaughan Granier is National Workplace Relations Manager for HR Assured NZ.