In times of economic decline, employers pay very close attention to their bottom line. As a result, underperforming employees will often be the first in the firing line. But what is the best way to deal with such employees?

Prudent employers need to ensure that at all times they have effective performance management systems in place to ensure that peak performers are encouraged and poor performers are dealt with in a constructive and appropriate way. More than ever, with employers acutely aware of their companies' financial performance, the issue of managing poor performance of individual staff is featuring as a priority. Some employers in this situation immediately look for a restructuring option and a resulting redundancy for the non performing employee. However, this is not consistent with an employer's obligations of good faith and can be a high risk scenario. Consequently, employers should return to the concept of best practice management and deal with performance issues in a constructive manner to ensure that employees are performing at an appropriate level or are appropriately dealt with by way of performance management.

It is critical for employers to follow a proper performance management process to ensure any subsequent claims of procedural unfairness are avoided. The first obligation employers have which needs to be kept front of mind when dealing with performance issues, is to deal with any problem as soon as it arises.

It is often a helpful preliminary step to have an informal chat with the employee and discuss the performance issue with them. In some cases, it might be as simple as bringing the performance concern to an employee's attention, as they may not have realised it an issue, or there may be a legitimate explanation for their behaviour. However, any informal discussion should be recorded in writing and placed on the employee's personnel files. If the matter is not resolved, the employer will need to commence a formal performance management procedure.

This involves:

  • Holding a formal meeting to discuss the problem.
  • Giving the employee the opportunity to improve.
  • Taking action where performance does not improve.

Remember that any action taken must be in compliance with employment agreements, policies and procedures, and the good faith provisions.

If you would like to discuss your options around which action to take and setting up a fair process, please do not hesitate to contact us.

© DLA Phillips Fox

DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit www.dlaphillipsfox.com

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.