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How to Effectively Manage Underperformance

How to Effectively Manage Underperformance

Learn about how you can deal with underperforming employees in your company.

30th January 2018

You have an employee who is an absolute slacker and doesn’t finish their tasks on time. You’ve tried to approach them about the issue, but they brush you off with ‘I’m having a bad day’. At your wits end, you are unsure about the next step you should take.

Underperformance, or poor performance is when an employee is not doing their job properly. This includes not doing their work to a satisfactory standard, not following policy, or just general disruptive behaviour.

Left unaddressed, underperformance may often escalate, as employees could be unaware that they are not performing well. This could adversely affect overall business and company productivity. However, managing underperformance is not as simple as dramatically yelling ‘You’re fired!’, as seen on T.V. There are key preparations to be undertaken, and it is always important to be legally prepared with the right documentation.

Here’s what you can do to effectively manage underperformance.

Preventing underperformance

The obvious preventative measure against underperformance is to prepare a thorough contract. Having clear performance and expectations and targets in your contract goes a long way to performance managing an employee. Some legal pitfalls that could be prevented through implementing precautionary measures and following relevant procedures include: adverse action, bullying and discrimination accusations, and unfair dismissal claims.

LawPath’s lawyer marketplace allows you to compare and choose employment contract lawyers on a fixed-price basis, to ensure that your contract is effective when dealing with an underperforming worker.

Managing underperformance

While it may often seem simplest to cut off the underperforming worker, the costs of firing and rehiring should not be underestimated. It is often the better alternative to encourage improvement with the current employee instead.

The Fair Work Ombudsman provides a Best Practices Guide that encourages the employer to identify and assess the problem, by figuring out how long and how serious the problem has persisted. The employer should then hold a meeting with the underperforming worker, and use this chance to gain insight into both perspectives. Although giving someone the chance to respond to your misgivings can be used to prevent unfair dismissal claims down the line, it should not be viewed as a mere formality. It gives you greater insight into their circumstances and often also allows your employee to reflect on their past performance and improve. You could also have both parties sign an improvement plan in the meeting to get them back on track.

Following up

Unfortunately, if there are no signs of improvement, you may need to take further action. If they are not complying with the improvement plan during your regular follow ups, the employee should be presented with a written formal warning.

A final warning letter explains the unsatisfactory performance of the employee and puts the employee on official notice on how their performance must improve. It also warns of the risk of termination. If a fired employee later makes an unfair dismissal claim, the Fair Work Commission (FWC) will usually take any official warnings in writing into consideration. These warnings should include:

  • The reason for the warning;
  • All the details of past and present misgivings; and a
  • Fair and reasonable expectations of future performance levels and what should be done differently.

Last Resort: Termination

If an employee’s performance has still not improved to an acceptable standard, termination of employment can be considered. Employees cannot be dismissed in situations that are “harsh, unjust or unreasonable”.

Before terminating someone, you must look at the terms of termination in that employee’s employment contract. You need to make sure they are given the right Notice of Termination. The notice period must be considered depending on the contract and the National Employment Standards (NES). Furthermore, a reasonable final pay should be worked out too.

For a comprehensive guide on how to fire someone, check out our previous guide.


Dealing with an underperforming employee can be tricky, and terminating them can be even trickier. There are many legal pitfalls that need to be dealt with to prevent bullying or unfair dismissal claims. You should consider hiring an employment lawyer to provide you expert legal advice and help you navigate the complex area of employment law.

Require an employment lawyer? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from our lawyer marketplace to ensure you can effectively manage underperformance.

Diana Liu

Diana is a Legal Intern at Lawpath working with the content team. With an interest in torts law and commercial law, she is currently completing a Bachelor of Laws as well as a Bachelor of Commerce at the University of New South Wales (UNSW).