Managing Underperformance

Overview

Managing underperformance is one of the most common — and most legally sensitive — tasks an employer faces. Done well, a performance management process can genuinely support an employee to improve and protect the business if improvement does not occur. Done poorly, it can expose the employer to unfair dismissal claims, general protections applications, bullying complaints, and discrimination proceedings.

The Fair Work Act 2009 (Cth) does not prescribe a specific process for managing underperformance. However, the statutory criteria for assessing whether a dismissal is harsh, unjust, or unreasonable effectively set the benchmark. The Fair Work Commission expects that an employee will be clearly told what the performance issue is, given a reasonable opportunity to improve, supported in that process, and warned that their employment is at risk if improvement is not achieved. An employer who cannot demonstrate these steps took place will struggle to defend a subsequent termination.

Performance management sits in an inherently difficult space. It requires balancing the employer’s legitimate right to set and enforce standards with the employee’s right to be treated fairly and given a genuine opportunity to meet expectations. The process must be firm enough to be meaningful, but fair enough to withstand external scrutiny.

Key Considerations

The starting point is clarity of expectations. An employer will be in a significantly stronger position if it can demonstrate that the employee was told — in clear, specific terms — what was expected of them and how their performance was falling short. Vague feedback such as “you need to improve your attitude” or “your work isn’t up to standard” is unlikely to satisfy the Commission that the employee was given a genuine opportunity to address the concern.

A performance improvement plan is not legally required, but it is the most common and effective mechanism for documenting the process. A well-constructed plan will identify the specific areas requiring improvement, set measurable and time-bound objectives, outline the support the employer will provide, and make clear the potential consequences — including termination — if the required standard is not met within the specified timeframe.

The process must be genuine. A performance management process that is predetermined — that is, one in which the employer has already decided to terminate regardless of the outcome — will not be regarded as a genuine opportunity to improve. The Commission is alert to processes that are designed to create a paper trail rather than to support improvement, and will scrutinise the chronology, the reasonableness of the timeframes, and whether the objectives set were realistically achievable.

Support persons and procedural fairness apply throughout the process. The employee should be informed of concerns in writing, given the opportunity to respond, and permitted to have a support person present in meetings where their employment may be at risk. A failure to afford these procedural protections can render a subsequent dismissal unfair even where the underlying performance concerns were well-founded.

There is a meaningful intersection between performance management and other jurisdictions. An employee who is being performance-managed may allege that the process constitutes adverse action for a prohibited reason (triggering a general protections claim), that the manner in which it is being conducted amounts to workplace bullying, or that it is connected to a protected attribute such as a disability. These risks do not mean an employer cannot manage performance — but they do mean the process must be conducted carefully and with an awareness of the broader legal landscape.

How We Can Help

We advise employers on designing and implementing performance management processes that are procedurally sound, substantively defensible, and proportionate to the circumstances. We also represent employers and employees in disputes arising from performance management — including unfair dismissal claims, general protections applications, and stop bullying proceedings.

Whether you are at the beginning of a process and want to ensure you are setting it up correctly, or a matter has escalated and you need to respond to a claim, we can provide clear, practical guidance.

Speak With Our Team

If you are managing an underperformance issue and want to understand how to approach it lawfully and effectively — or if you are an employee who believes a process is being conducted unfairly — we are happy to discuss your situation in confidence.