Conduct versus capability: knowing the difference
Before you address a performance issue, you need to understand what you are dealing with. Employment law draws a clear distinction between conduct and capability, and they require different approaches.
Conduct is a "won't do" problem. The employee has the skills and ability to do the job, but they are choosing not to. This could be lateness, refusal to follow instructions, or breach of company policy. Conduct issues are handled through the disciplinary process.
Capability is a "can't do" problem. The employee is trying but is not meeting the required standard. They may lack the skills, training, knowledge, or aptitude to do the job effectively. Capability issues are handled through performance management and, if necessary, a formal capability process.
Getting this distinction right matters. Using a disciplinary process to deal with a genuine capability issue is unfair and will not stand up at tribunal. This guide focuses on capability and performance management.
Start with an informal conversation
Most performance issues can be resolved without going anywhere near a formal process, and that should always be your starting point.
Arrange a private, one-to-one conversation with the employee. Be specific about what is not meeting the required standard. Vague feedback like "you need to do better" is unhelpful and unfair. Instead, use concrete examples: "The last three reports you submitted contained significant errors" or "You have missed your sales target for three consecutive months."
Ask open questions to understand what might be contributing to the problem:
- Are they clear about what is expected of them?
- Have they received adequate training for the role?
- Is their workload manageable?
- Are there personal circumstances affecting their work?
- Do they have the right tools and resources?
You may discover that the issue is not the employee's ability at all. It could be a gap in training, unclear expectations, or a problem with how the role is structured. If so, fix the underlying cause before assuming the employee is at fault.
Agree an informal action plan together. Set clear, measurable objectives with realistic timescales. Offer whatever support is appropriate, whether that is additional training, mentoring, or adjustments to workload. Schedule a review date to check progress.
Document the conversation and the agreed actions, even at this informal stage. A brief email confirming what was discussed and agreed is sufficient. If the issue escalates later, this record is essential.
Setting clear expectations from the start
You cannot fairly manage someone against standards they do not know about. This is a point that catches many employers out at tribunal.
Every employee should have a clear job description that accurately reflects their role. They should understand the key performance indicators or objectives they are being measured against. If these have never been set, or if the role has evolved significantly since the employee started, you need to address that before you can reasonably expect improvement.
If your business does not have formal objectives or appraisal processes in place, an HR health check can help you identify gaps and put proper frameworks in place.
When informal support is not enough
If you have had the informal conversation, provided support, and given the employee a reasonable chance to improve but performance is still below the required standard, it is time to move to a formal capability process.
The formal process follows the Acas Code of Practice on Disciplinary and Grievance Procedures. While the Code uses the word "disciplinary," it applies to capability dismissals as well.
Step 1: Invite to a formal meeting
Write to the employee inviting them to a formal capability meeting. The letter should explain the performance concerns, provide specific examples, and include any relevant evidence. Remind the employee of their right to be accompanied by a colleague or trade union representative.
Give reasonable notice of the meeting. At least five working days is good practice, though the Acas Code does not specify a minimum.
Step 2: Hold the meeting
At the meeting, explain the performance concerns clearly. Refer to specific examples and the standards the employee is expected to meet. Give the employee a full opportunity to respond. Listen carefully. There may be factors you are not aware of, such as health issues, problems at home, or difficulties with a particular aspect of the role.
Step 3: Agree a Performance Improvement Plan
If you decide to proceed, set out a formal Performance Improvement Plan (PIP). An effective PIP includes:
- SMART objectives. Specific, Measurable, Achievable, Relevant, and Time-bound targets that the employee must meet.
- Support measures. What you will provide to help the employee improve. This could include training, mentoring, coaching, shadowing, or adjustments to workload.
- Review dates. Regular check-in meetings to assess progress. Fortnightly is typical, though this depends on the role.
- Duration. A reasonable review period, typically between four and twelve weeks. Shorter for straightforward roles, longer for complex or senior positions.
- Consequences. A clear statement that failure to improve may result in further formal action, up to and including dismissal.
Step 4: Monitor and review
Hold the scheduled review meetings. Document the employee's progress against each objective. Provide honest, constructive feedback. If they are improving, acknowledge it. If they are not, be clear about the shortfall and what still needs to change.
Step 5: Decide the outcome
At the end of the PIP period, you will be in one of three positions:
Performance has improved. Confirm this in writing, acknowledge the effort, and set expectations going forward. Continue to monitor informally for a reasonable period.
Some improvement but not enough. You may extend the PIP for a further period, adjust the support measures, or issue a formal warning with a further review period.
No meaningful improvement. If the employee has been given genuine support and a fair opportunity to improve but performance remains below the acceptable standard, you may issue a final written warning or, in appropriate cases, proceed to dismissal for capability.
If you are considering dismissal, make sure you have followed every step of the process, documented everything, and given the employee a genuine chance to improve. Offer the right to appeal any decision.
Common mistakes in performance management
Setting people up to fail. A PIP with unrealistic objectives, no support, and a two-week review period is not a genuine attempt to improve performance. It is a mechanism to push someone out, and tribunals recognise this immediately.
Not providing genuine support. If you put someone on a PIP but do not deliver the training, mentoring, or other support you promised, the process is unfair. You must follow through on your commitments.
Poor documentation. If you have had multiple conversations about performance but none of them are documented, you have no evidence to support formal action. Get into the habit of recording conversations, even brief email summaries after informal catch-ups.
Skipping the informal stage. Jumping straight to a formal PIP without first having an informal conversation and giving the employee a chance to improve is disproportionate. Tribunals expect employers to try informal resolution before escalating.
Using capability as a cover for something else. If the real issue is a personality clash, a restructure, or a desire to replace the employee with someone cheaper, do not dress it up as a capability process. Tribunals will see through it.
Disability and performance management
If an employee's poor performance is linked to a health condition or disability, you have additional obligations under the Equality Act 2010.
Before taking formal action, consider whether reasonable adjustments could help the employee meet the required standards. This might include changes to their working hours, duties, equipment, or work environment. An occupational health referral is advisable to understand the employee's condition and what adjustments might be appropriate.
Dismissing a disabled employee for performance without first exploring reasonable adjustments is likely to be disability discrimination, regardless of how thorough your capability process was.
Why this matters more than ever
The Employment Rights Act 2025 is bringing significant changes to unfair dismissal law. From January 2027, the qualifying period for bringing an unfair dismissal claim drops from two years to six months. The compensation cap is also being removed, meaning there is no upper limit on what a tribunal can award.
Even during the new statutory probation period, employers will need to demonstrate that they followed a fair process before dismissing. The days of quietly letting someone go during their first year without any formal procedure are coming to an end.
Investing in proper performance management processes now will pay for itself many times over when these changes take effect.
How Rebox HR can help
We help SMEs across the UK build effective performance management frameworks, from setting objectives and running appraisals to managing formal capability processes and supporting managers through difficult conversations.
If you have an employee who is not performing and you are unsure how to handle it, or if you want to put proper processes in place before problems arise, we can help. We offer disciplinary and grievance support, guidance on fair dismissal, and practical manager training on handling performance issues with confidence.
Book a free consultation and we will talk you through your options.
