Underperformance is one of the most challenging issues HR managers support. Getting it wrong exposes organisations to legal risk, disengages teams, and undermines culture. Getting it right builds fairness, confidence, and improved results.
This article sets out a clear framework—aligned with the Employment Rights Act 1996, the Acas Code of Practice, and anticipated reform under the Employment Rights Bill—to help HR managers guide line managers through capability and performance issues with confidence.
Capability vs Conduct — getting the first step right
A common pitfall is failing to distinguish between capability (cannot) and conduct (will not). This matters, because each requires a different process.
• Capability: Lack of skill, aptitude, health, or ability.
• Conduct: Deliberate choice not to perform.
Choosing the wrong route undermines fairness and increases the risk of claims. Always diagnose carefully before acting.
The fair capability process — a manager’s roadmap
1. Identify the issue and gather evidence
Collect data from appraisals, quality metrics, and feedback. Meet the employee to understand the root cause—skills gap, resources, health, or attitude—and decide the right route.
2. Set a Performance Improvement Plan (PIP)
Agree SMART objectives with clear measures, realistic timelines, and identified support (e.g. training, mentoring). The PIP must be fair, not a “set up to fail.”
3. Provide reasonable opportunity to improve
Communicate expectations, provide necessary resources, and set review points. Allow time aligned to the role and business cycle.
4. Escalate fairly if needed
If progress is insufficient, follow a staged process: first warning → final warning → dismissal only as a last resort. Ensure the employee’s right to be accompanied and to appeal.
Health, disability and reasonable adjustments
Where health is in play, managers must tread carefully:
Obtain medical or occupational health input.
Explore reasonable adjustments to hours, duties, tools, or processes.
Consider redeployment if a suitable role is available.
Failure to consider adjustments where disability applies risks discrimination claims from day one of employment.
Common pitfalls — and how to avoid them
Delaying conversations → address issues promptly.
Vague objectives → always set SMART, role-relevant targets.
Insufficient support → document training, coaching, and resources offered.
Poor records → keep contemporaneous notes; assume they may be disclosed in a tribunal.
Handling tricky scenarios without losing fairness
Grievances mid-process → consider pausing or appointing a different manager.
Sickness absence → maintain contact, seek medical advice, and extend timeframes reasonably.
Probation → still follow a fair, documented process; remember discrimination protection applies from day one.
Legal risks and forthcoming change
Unfair dismissal exposure: skipping stages or rushing dismissal risks tribunal claims.
Equality and discrimination: failure to make reasonable adjustments can lead to unlimited awards.
Reform to watch: The Employment Rights Bill is expected to remove the two-year qualifying period for unfair dismissal (from 2026). Employers should strengthen probation reviews and intervene early in performance issues now.
Building manager confidence — skills, systems, culture
HR’s role is to equip managers to act consistently and lawfully:
Practical skills: training on performance conversations, PIPs, and distinguishing conduct vs capability.
Structured tools: templates for PIPs, review logs, and meeting notes to ensure consistency.
Supportive culture: normalise feedback, recognise improvement, and encourage early escalation.
Dismissal as a last resort
If dismissal becomes unavoidable, safeguard fairness:
Review all evidence of underperformance and support provided.
Consider redeployment or adjustments one last time.
Hold a final hearing, confirm reasons in writing, and offer an appeal handled by someone independent.
Handled correctly, dismissal for capability can be legally robust. But handled well earlier, most issues never reach that stage.
Final thought
For HR managers, the goal is twofold: protect the business against legal risk and empower managers to handle underperformance with fairness and confidence. By embedding structured capability processes, providing practical tools, and preparing for upcoming legal change, HR leaders can transform performance management from a reactive risk area into a driver of organisational success.
This article was created with insights from Lex HR - your always-on HR legal assistant. Lex HR helps HR professionals navigate complex employment law with confidence, providing real-time, reliable advice tailored to your needs. Try it free today and see how much easier compliance can be.
