Conduct and Performance

The Carrot and the Stick: The Tricky Issue of Appropriate Disciplinary Action by Employers


Disciplinary action for poor or inappropriate performance is all too often seen in very one-dimensional terms. Often, it can be a fantastic opportunity for the business to address difficult issues in a constructive and ultimately extremely cost effective way. However, in most circumstances the use of warnings serves only to alienate and disincentivise employees, to the extent that they either leave the business or the business terminates the employment. When it comes to disciplinary action in the workplace, it is our experience that many employers seem to limit themselves to the use of only warnings or dismissal even though there may be a range of other options available to employers. This was recently highlighted by Commissioner Williams in a recent Fair Work Commission decision where he encouraged employers to introduce a greater range of disciplinary options to avoid inappropriately lenient or inappropriately harsh responses to misconduct.

Disciplinary action will most commonly occur when there is a history of unacceptable performance; or unacceptable conduct. In addition, it may be necessary for an employer to address performance or conduct that is serious or inappropriate even if it is just a single occasion. As such, a one size fits all approach disciplinary outcomes may not be the most effective solution, and more often than not does not address the issue. In this regard, it is important for employers to have in place an arsenal of suitable disciplinary procedures and policies to ensure fair and equitable processes when addressing employee issues.

Disciplinary action may take many forms, and it may be formal or informal. Disciplinary action may include:

  • verbal or written warnings;
  • suspension;
  • supervision
  • training/upskilling;
  • demotion;
  • removal of discretionary bonuses;
  • reduction in salary or wages
  • not offering overtime or other opportunities;
  • dismissal.


Warnings may be in written or verbal form. Warnings are a necessary part of any disciplinary procedure and are important in informing the employee of the gravity of the concern and the need for improvement. However, often warnings alone are insufficient to change employee behavior, or are all too often ignored. The aim of a warning should be to alert the employee to the issues of concern and to encourage the employee to improve the performance or conduct. The matters that may result in a warning alone are usually of a less serious nature.

Warnings play a critical role in the context of whether a dismissal was fair. If there is a prospect that a repeat of the employee’s conduct or unsatisfactory behavoiur could lead to a dismissal, then this needs to be clearly expressed in the warning given to the employee. The Courts have looked negatively at employers who fail to warn employees that their conduct could result in dismissal, and an accurate paper trail is always imperative.


Suspension can be a useful disciplinary tool when there is serious misconduct on part of the employee and the employer requires time to conduct a thorough investigation and decide the appropriate next steps and disciplinary action.

However, suspension alone may itself be a useful disciplinary tool, if employers are able to suspend an employee without pay. Employers may lawfully suspend an employee without pay if there is a contractual, award or statutory right available to suspend an employee. However, in the absence of such a provision, there is no general common law right to suspend an employee without pay due to their misconduct, even where their misconduct would justify instant dismissal.

Employers may in some cases choose to suspend a worker on full pay, though this is in an expensive option. This practice is usually reserved for workers who are temporarily removed from duties, while under investigation for misconduct rather than a disciplinary tool. Employers should consider whether the introduction of suspension without pay as a form or discipline may be of use, and as such take steps to ensure they can lawfully do so.


When it comes to performance based problems, a supportive and open approach may be beneficial in gaining the most out of your employee. An employer may consider the use of coaching, training or upskilling an employee who demonstrates deficiencies in performing the functions or meeting the goals of their position. In these instances, we recommend discussing and acknowledging the employee’s lack of ability early on and provide consistent and regular performance assistance, evaluation, coaching and training.

Training may also be used as part of the disciplinary process where the employer may request the employee to undertake specific training that relates to the misconduct or inappropriate behaviour by the employee. For instance, an employer may require an employee to undertake training regarding appropriate behaviour in the workplace following a finding that the employee behaved inappropriately. Training, coaching and mentoring may assist in circumstances of bullying, interpersonal conflict and the like. This option gives the employee an opportunity to improve their skills in a supportive environment and is often far more effective than a warning.


A demotion occurs when an employer offers, and the employee accepts, a lower graded position with the common consequence of a reduced wage or salary in the alternative to other disciplinary action (most commonly termination). In certain circumstances demotion may be useful as a form of disciplinary action rather than dismissal. However, an employer should not unilaterally demote an employee without their direct consent or without an express term which allows for such action within the employment contract. In circumstances where dismissal may be overly harsh, demotion may be a very useful alternative. However, even if there is an express power to allow for demotion in the employment contract, employers should take care when demoting an employee and ensure that the reasons for doing so do not include a prohibited reason and that the demotion is reasonable disciplinary action for the misconduct or underperformance of the employee.

Payment of discretionary bonus

Payments to employees which are purely discretionary may be withheld as part of disciplinary action. However, it is important employers determine whether any bonuses paid to employees are truly discretionary. Interpretation of the terms of an employee’s entitlement to a bonus is subject to common law principles. The courts have found that even though the contract may stipulate the entitlement to a bonus is discretionary, there is an implied obligation not to exercise the discretion capriciously or arbitrarily. However, the threat of the removal or reduction of discretionary payments may constitute an effective deterrent when coupled with an effective an appropriate warning.

Not offering opportunities

If an employer wants to send a very strong message to an employee that their conduct or performance is unsatisfactory, other than warnings and dismissal, employers may wish to consider withholding opportunities to an employee. For example, employee may be prevented from progressing unless they show improvement or prevented from working additional shifts or overtime. The manner in which this type of disciplinary action is taken will largely depend on the organization, the nature of the employee’s role and whether there are opportunities that can be withheld, delayed or denied.


As a last resort and depending on the circumstances, employers may need to consider dismissal. Dismissal may be entirely appropriate in circumstances of serious misconduct, or where other disciplinary action has previously been taken to no avail. However, dismissal should not be the first option considered but rather the last. In our experience, sometimes even the most serious cases of poor performance, if given the correct encouragement, assistance and disciplinary steps an employee can become a valuable asset rather than a legal liability.

In all instances where any form of disciplinary action is considered, it is important that the employer must provide the employee with an opportunity to respond to the concerns raised by the employer before any action is taken. It is important that the employer follow a fair and reasonable procedure and in particular follow any of its written policies.

Lessons for employers

Clear expectations, appropriate supervision and regular feedback are the best ways to avoid the necessity of implementing a discipline process or action. However, when problems with behaviour or performance occur, disciplinary action may be necessary. A business’ approach to an appropriate disciplinary procedure and action should be determined on a case by case basis. The disciplinary action should be assessed with a view to rectifying the conduct and creating a sufficient deterrent, but not such that would effectively destroy the employee’s motivation to improve. It should also be commensurate to the problematic conduct or performance it is attempting to address. In most circumstances dismissal should be the last resort.

It is also vital for employers to review current employment contracts to ensure the organization has express power to undertake and utilize some of the disciplinary options discuss above. Without express terms within the employment contract the business may be left exposed when attempting to undertake appropriate disciplinary action. Employers should also ensure accurate records of all discipline related discussions are kept. These records can be particularly useful if an employee lodges an adverse action or unfair dismissal claim.

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