When an employee’s performance falls short, the stakes are high. Poor handling can trigger unfair dismissal claims, costly tribunal proceedings, and reputational damage.
What Counts as Underperformance?
Underperformance means an employee is not meeting the standards of their role. This could be:
- Missing deadlines consistently
- Producing work below the required quality
- Failing to follow procedures or instructions
- Inadequate customer service or interpersonal conduct
- Inability to meet KPIs or measurable targets
Step 1: Identify the Problem Clearly
Before taking formal action, identify exactly what the performance issue is. Be specific:
- Not: “Sarah isn’t performing well.”
- Yes: “Sarah has missed three project deadlines in the last six weeks, impacting the client delivery schedule.”
Step 2: Informal Feedback & Support
Start informally. Speak to the employee face-to-face (or via video if remote) and explain the performance concern clearly. Make it a conversation, not an accusation:
- Additional training or mentoring
- Clearer role documentation or KPIs
- Temporary workload reduction
- Access to Employee Assistance Program (EAP)
- Flexible working arrangements to manage personal challenges
Step 3: Formal Performance Improvement Plan (PIP)
If informal feedback hasn’t worked, move to a formal Performance Improvement Plan. This is a written agreement between you and the employee, setting clear expectations and timelines.
- What needs to improve: Be specific (e.g., “Reduce report errors from 5 per month to zero”).
- How improvement will be measured: Clear KPIs or success criteria.
- Timeline: Usually 4–12 weeks, depending on complexity. Longer timelines look fairer.
- Support provided: Training, mentoring, resources, flexible working, EAP access.
- Review schedule: Weekly or fortnightly check-ins (documented).
- Consequences of non-improvement: State that failure to improve may result in further action, up to and including termination.
Step 4: Document Everything
Throughout this process, document meticulously. Record:
- Date and time of each conversation
- Who was present
- What was discussed
- Specific performance examples
- What support was offered
- The employee’s response
- Next steps and timeline
Email is your friend here. After each conversation, send the employee a brief email summarizing what was discussed and agreed:
“Hi Jamie, following our conversation on 15 June, we agreed you will attend Excel training (Friday 20 June) and submit weekly status updates by EOD Friday. Our next check-in is 27 June. Please confirm you’ve received this summary.”
Store all documents in a secure file (not on shared drives). This creates a defensible record if you eventually need to terminate and the employee claims unfair dismissal.
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Step 5: Monitor Progress
Conduct regular review meetings — weekly or fortnightly — with the employee present. These should be genuine conversations: celebrate progress, adjust support if needed, and reset expectations if circumstances have changed.
- Is the employee meeting the agreed targets?
- Are there new obstacles we need to address?
- Has the support been effective?
- Do they understand the consequences if improvement doesn’t happen?
Step 6: The Decision to Terminate
If the employee has not met the PIP targets and the time period has elapsed, you may decide to terminate for performance reasons. This must still be fair and procedurally correct.
- Have we given adequate time and support?
- Is the performance standard reasonable for this role?
- Did we document everything?
- Have we given the employee a fair warning and opportunity to respond?
- Is dismissal the proportionate response, or should we consider demotion, role change, or further support?
Step 7: The Dismissal Meeting & Notification
Conduct a formal dismissal meeting. Ideally, have two managers present (or a manager and HR). Inform the employee clearly and directly:
- The performance issue and what wasn’t met
- The opportunities given to improve
- Your decision to end their employment (be direct — “We’ve decided to terminate your employment effective [date].”)
- Final pay details (final week’s pay, accrued leave payout)
- Handover and equipment return arrangements
- Reference letter policy
- Superannuation and post-employment entitlements
Step 8: Protecting Yourself from Unfair Dismissal Claims
An employee can claim unfair dismissal within 21 days of being terminated if they’ve been employed for at least 6 months (12 months for small businesses under 15 employees). The Fair Work Commission will assess whether the dismissal was fair.
- Procedural fairness: Did the employee know the performance standard and have a fair chance to meet it?
- Genuine performance reason: Was the stated reason real, or a pretext for something else (e.g., retaliation, discrimination)?
- Proportionality: Was dismissal the reasonable response, or should you have tried something less severe?
Common Pitfalls to Avoid
1. Dismissing without a PIP — If you’ve fired someone for poor performance after just one informal conversation, you’re vulnerable. Even a short PIP (4 weeks) is better than none.
What If the Employee Is on Probation?
Many employers think probation means “we can fire them easily.” This is wrong. Even probationary employees are protected from unfair dismissal — the same Fair Work principles apply.
Key Takeaways for Employers
- Be clear: Define the performance standard and communicate it clearly.
- Be fair: Give informal feedback first, then a formal PIP if needed. Allow adequate time (4–12 weeks).
- Be supportive: Offer training, mentoring, and resources. Many performance issues are fixable.
- Document: Record every conversation, decision, and outcome in writing.
- Be proportionate: Consider whether dismissal is the right response or whether reassignment, retraining, or further support would work.
- Check for discrimination: Ensure your treatment is consistent and not motivated by age, disability, sex, race, or other protected attributes.
- Notify fairly: When terminating, give clear reasons, final pay details, and written confirmation on the day.
Following this seven-step process dramatically reduces your risk of unfair dismissal claims and shows the Fair Work Commission (if it comes to that) that you acted reasonably and in good faith.
Frequently Asked Questions
Legally, there’s no mandatory PIP requirement in the Fair Work Act. However, a formal PIP (typically 4–12 weeks) shows the Fair Work Commission you acted fairly if the employee claims unfair dismissal. It documents the standard, support offered, review dates, and consequences. Without a PIP, you’re vulnerable to unfair dismissal claims. A short PIP is far better than dismissing after a single informal conversation.
Most PIPs run 4–12 weeks, depending on the complexity of the issue. Simple problems (e.g., missing one administrative step) might resolve in 4 weeks. Complex issues (e.g., technical skills gaps) may need 8–12 weeks. Longer timelines look fairer to the Fair Work Commission and give employees a genuine opportunity to succeed. Always have weekly or fortnightly review meetings during the PIP period.
A fair PIP includes: (1) specific, measurable performance targets; (2) clear success criteria; (3) timeline (4–12 weeks typically); (4) support provided (training, mentoring, resources, EAP access); (5) review schedule (weekly or fortnightly check-ins); (6) consequences of non-improvement (up to and including termination). Provide it in writing, get the employee’s signature, and keep it on file. If they refuse to sign, note that and proceed.
No. Even probationary employees are protected from unfair dismissal under the Fair Work Act. Probation means there’s no minimum notice period if you follow fair process, but you still must demonstrate fair, reasonable, and procedurally correct dismissal. You still need to document performance concerns, give feedback, and follow a fair process — or risk an unfair dismissal claim.
Keep: (1) the written Performance Improvement Plan; (2) email summaries of each conversation; (3) meeting notes with dates, times, attendees, and specific examples; (4) records of support offered; (5) review meeting outcomes; (6) evidence of progress (or lack thereof); (7) written notice of dismissal with the reason and final pay details. This documentary evidence is crucial — it’s your defense if the employee claims unfair dismissal.
If the employee hasn’t met the PIP targets by the end date, and you’ve documented that fairly, you can dismiss immediately. However, consider whether a brief extension or adjusted plan might work — the longer you show reasonable patience, the fairer the dismissal looks. Give the dismissal decision in a formal meeting, then provide written confirmation the same day with details of final pay, leave payout, and any severance.
If performance management coincides with a protected attribute (age, disability, sex, race, religion, etc.), and you haven’t treated other employees the same way, the employee may claim discrimination. The Fair Work Commission will look at whether similar poor performance by other employees was handled the same way. Be consistent: if you managed one employee’s underperformance gently, don’t harshly dismiss another for the same issue based on their age or disability.
You have a duty to explore reasonable adjustments under the Disability Discrimination Act. Before moving to performance management or termination, ask: Does the employee have a disability or health condition? Can we adjust the role, workload, environment, or tools to support them? If reasonable adjustments can help them perform, you must try them. Ignoring this may expose you to discrimination claims — and dismissal without considering adjustments will very likely be found unfair.
If an employee files an unfair dismissal claim within 21 days of dismissal, the Fair Work Commission will review whether the dismissal was fair. Bring your documentation: the PIP, email records, meeting notes, and evidence of support. The Commission will assess procedural fairness (did they have a fair chance?), a genuine performance reason (was it real?), and proportionality (was dismissal the right response?). If you’ve followed this guide, you have a strong defense.
Underperformance means an employee isn’t meeting the standards of their role — missing deadlines, producing low-quality work, failing to follow procedures, or not achieving measurable KPIs. The Fair Work Act doesn’t define it rigidly; the Fair Work Commission assesses whether dismissal for this reason was fair, reasonable, and procedurally sound. You must follow a clear, documented process and provide genuine opportunities to improve.
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