Performance management describes the process of managing an employee who is underperforming or conducting themselves poorly through to termination of their employment. An employer must act fairly and reasonably at all times throughout the process.
The legal risks of a poorly managed process are extensive and include an unfair dismissal application, an unlawful termination application, a breach of contract claim, a discrimination claim and a workers compensation claim!
Not to mention the non-legal risks including a damaged reputation, disgruntled workforce and wasted time and resources dealing with rumours and dissatisfied employees.
Features of a fair, transparent and defensible performance management process are as follows:
- Use appropriate employment contracts with position or role descriptions.
- Develop workplace policies, procedures and codes of conduct that can be followed.
- Inform an employee if they are not meeting required standards of performance or otherwise acting unsatisfactorily. Employees should be informed via a meeting accompanied by a show cause letter detailing the behaviour and relevant performance criteria from their contract, position description and relevant policies.
- Allow an underperforming employee an opportunity to show cause or improve their conduct. An employee may have a valid and acceptable explanation for their unsatisfactory performance. If not, the employee should be granted a reasonable period of time to improve their performance. During this time, consider whether the employee might benefit from counselling, mentoring, training or disciplinary action such as a formal warning or revoking privileges.
- Revisit the employee’s conduct after a reasonable period. An employer must give an employee a reasonable opportunity to demonstrate they have improved their performance. What is reasonable depends on the nature of your business and the particular performance issue. For example, lateness to work can be improved over a week or two, however, budget issues may take a full financial reporting period. It can be helpful to set a series of employee reviews to monitor performance.
- Document each step in the process including letters, meeting notes and responses from the employee. Employees can be asked to counter-sign meeting minutes. This documentation will form the basis of your defence to any legal action taken by an employee.
- If the employee does not improve their conduct after being invited to show cause and improve their conduct after a reasonable period, you may be entitled to terminate their employment. An employee should have their employment terminated in a compassionate manner in person accompanied by a detailed letter of termination.