The Situation/Problem

Another common enquiry from AGHA Members to the HR Advisory Service relates to how to handle a situation when an employee is underperforming. This case will illustrate best practice when it comes to managing poor performing employees.

An employee is underperforming when their work performance becomes unsatisfactory and is demonstrated when they fail to perform the inherent tasks of their job or they perform them below an acceptable standard. Poor performance is also when an employee does not comply with a lawful instruction or workplace policies and procedures. Underperforming can also include behavior that is unacceptable, disruptive or negative which impacts on fellow workers. Underperformance does not include misconduct which is more of a serious nature such as theft, violence, possession and/or consumption of illegal substances or serious and deliberate breach of work health and safety policies. In such serious cases, members should immediately contact the HR Advisory Service for advice before taking any action.

There are many reasons that impact on an employee’s performance at work that commonly include, an employee doesn’t know what is expected because goals and/or standards or workplace policies and consequences are vague or absent, interpersonal differences, a mismatch between an employee’s capabilities and the job they are required to undertake, no feedback or counselling when they are performing well or poorly, low workplace morale or personal motivation, personal issues involving family, physical and/or mental health or substance abuse problems, cultural misunderstandings or workplace bullying.



Underperformance issues need to be managed promptly and appropriately by an employer, as employees are often unaware they are not performing well and therefore poor performance will continue. Underperformance issues that are not addressed promptly have the potential to become more complicated and serious and have a negative effect on the business, and productivity and performance of the entire workplace.

A consistent performance management process can assist an employer to implement effective solutions that supports the workplace culture and is accepted and valued by employees. Here is an easy to follow step by step guide to managing underperformance.


Step 1 – Identify the problem

It is important to understand the key drivers of performance or underperformance and this will assist to correctly and specifically identify the problem.


Step 2 – Assess and analyse the problem

The employer should determine: how serious the problem is, how long the problem has existed, and how wide the gap is between what is expected and what is being delivered. The employer then organises a meeting with the employee to discuss the problem letting them know the purpose of the meeting in advance so they can adequately prepare and if employee wants they can bring a support person of their choice.


Step 3 – Meet with the employee to discuss the problem

Hold a private open meeting discussion with the employee in an environment that is comfortable, non-threatening and away from distractions and interruptions. Begin the meeting by explaining to the employee the specific problem so they can clearly understand what the problem is, why it is a problem, how it impacts on the workplace, and why there is a concern ensuring that the employee is aware of tasks required of them.. Give the employee an opportunity to respond to the problem and duly consider their response and reasons for the underperformance, clarifying any details that may contribute to the problem. Part of the discussion should include recognition of the employee’s strengths and recent positive things they have achieved. The meeting should achieve an outcome where the employee is clear on what performance is expected from them.


Step 4 – Jointly devise a solution

Where possible, it is important that a solution is jointly explored and devised with the employee. An employee who has contributed to the solution will be more likely to accept and act on it. The solution becomes the clear action plan/agreement for the employee to follow and may include positive employer assistance, such as further training, mentoring, flexible work practices or redefining roles and expectations. The solution should include realistic timeframes for the employee to improve their performance. Another meeting should be planned with the employee to review their progress and performance against the agreed action plan. It’s best to keep a written record of your counseling meeting in case further action is required. Generally, it may also be used as evidence if legal action is taken about the matter.


Step 5 – Monitor performance

Performance management includes providing the employee with regular feedback and encouragement about their performance. Even if the employee’s performance improves another meeting should be scheduled to review and discuss the employee’s performance as this will enable both parties to acknowledge that the issue has been resolved, or to provide both positive and negative feedback to the employee to ensure that performance improvements are sustained. Further disciplinary action may need to be taken if the employee’s performance does not improve including further counseling, issuing formal warnings and ultimately if the issue cannot be resolved, termination of employment.


Unfair Dismissal

Employers cannot dismiss their employees in circumstances that are “harsh, unjust or unreasonable” and these factors will depend on each case. It is important to be fair to employees particularly when it comes to termination of employment. They should be given adequate time to improve, opportunity to respond to underperformance issues and a reason for termination.

From 1 January 2011, employers with fewer than 15 employees (based on head count test) will be covered by the Small Business Fair Dismissal Code which includes a checklist to avoid the termination is not harsh, unjust or unreasonable and will be considered as fair. The special dismissal code arrangements that apply to small employers are different to those that apply to larger businesses. Employees will need to have worked for a small business for 12 months in order to be eligible to make an unfair dismissal claim. It is recommended that the Small Business Fair Dismissal Code Checklist be reviewed before termination and completed when employee is terminated and should be kept with your records as it will assist you if an employee makes an unfair dismissal claim.

Before terminating any employee it is recommended that members call the HR Advisory Service to discuss specific information of the situation and your minimum legal obligations.



The member achieved significant understanding and appreciation of the importance of establishing effective performance management systems as they can have significant benefits for business, as it can lead to happier, more motivated and better performing employees. Reviewing, refining and implementing performance management systems are ways of helping achieve these significant benefits.


For more assistance, contact:

AGHA HR Advisory Service

Phone: 1300 315 355

Fax: 02 8448 3299

Email: This email address is being protected from spambots. You need JavaScript enabled to view it.