How to Dismiss an Underperforming Employee Fairly and Legally

Consistent underperformance can hold back a field service team, reduce customer trust and place strain on those who are meeting expectations. When improvement efforts have been exhausted, dismissal may be necessary, but employers must follow a fair and well documented process. UK law sets out strict requirements for capability based dismissals, and a misstep can lead to unfair dismissal, discrimination or constructive dismissal claims.

This guide explains how to manage performance concerns in a structured and legally compliant way, using ACAS guidance and recognised government standards. It focuses on UK requirements and includes a short Ireland compliance checklist for organisations that operate across both jurisdictions.

Table of Contents:

1. The Legal Framework That Governs Performance Dismissals in the UK
2. Understanding Employee Rights Before the Process Begins
3. Probation and Early Stage Performance Management
4. Why the ACAS Code is Essential in Underperformance Cases
5. Identify and Evidence the Performance Issue
6. Hold an Initial Informal Meeting
7. Investigate Possible Underlying Causes
8. Invite the Employee to a Formal Capability Meeting
9. Set Up a Performance Improvement Plan (PIP)
10. Conduct Review Meetings Throughout the PIP Period
11. Invite the Employee to a Final Capability Hearing
12. Decision, Notice and Exit Arrangements
13. Avoiding Constructive Dismissal Claims During a Capability Process
14. Handling Grievances During a Performance Process
15. Common Mistakes Employers Make in Capability Dismissals
16. Using Settlement Agreements as an Alternative Route
17. What Happens if the Employer Fails to Follow the Correct Process
18. Ireland Compliance Summary (For Organisations Operating in Both Regions)
19. UK and Ireland Compliance Checklist for Capability-Based Dismissals

1. The Legal Framework That Governs Performance Dismissals in the UK

Employment tribunals assess dismissals using two tests. The employer must prove that the dismissal was for a fair reason, and that they followed a fair procedure as the foundation of a defensible dismissal.

This approach is consistent with the statutory tests described on the gov.uk website for dismissals and with ACAS’s Code of Practice on Disciplinary and Grievance Procedures, which tribunals consider when judging fairness.

The Five Potentially Fair Reasons for Dismissal

UK law recognises five categories that may justify a dismissal:

• Capability, which includes poor performance or ill health.

• Conduct, which includes behavioural concerns or disciplinary breaches.

• Redundancy, where the role is no longer required or business needs have changed.

• Statutory illegality, which applies where it would be unlawful for the individual to carry out the role.

• Some Other Substantial Reason, which acts as a catch-all category for significant issues that do not fit elsewhere.

Underperformance always falls within capability unless the issue involves deliberate non-compliance.

Both the ACAS Code and gov.uk capability dismissal guidance emphasise that capability dismissals require a process that supports the employee and allows time to improve.

Acas Code of Practice on disciplinary and grievance procedures

2. Understanding Employee Rights Before the Process Begins

An employee generally needs two years of service to bring an ordinary unfair dismissal claim.

However, tribunals, ACAS and gov.uk all make it clear that protection from discrimination, whistleblowing detriment, health and safety reports and certain family-related rights apply from day one. An employee can raise these claims even if they have just joined the business.

This means that a fair process is necessary even for short-service staff.

Written Terms, Implied Terms and the Duty of Trust and Confidence

An employment relationship exists even without a written contract. Many terms are implied by law, such as minimum notice requirements, the statutory minimum wage and working time protections. Employers and employees are also bound by the implied duty of mutual trust and confidence.

This principle is widely recognised by UK courts and referenced across gov.uk and ACAS resources. A capability process that is rushed, poorly communicated or unfairly applied can breach this duty. Constructive dismissal may arise if the employer’s behaviour amounts to a serious breach of contract, such as imposing an unjustified performance improvement plan, ignoring a grievance or maintaining an excessive workload.

The Equality and Human Rights Commission also stresses the importance of avoiding any discriminatory treatment when managing performance concerns.

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3. Probation and Early Stage Performance Management

Probation periods are designed to assess suitability, performance and behaviour. Most employers set a period of three to six months, but many fail to manage it properly. It’s generally recommend that contracts specify that probation continues until formally confirmed as passed.

Even during probation, ACAS encourages employers to:

• Highlight concerns at an early stage

• Explain the standards required

• Offer support and training

• Keep written notes of discussions

Dismissing during probation is generally simpler, but must still be based on objective, non discriminatory reasoning. Gov.uk guidance confirms that fair procedures still apply.

4. Why the ACAS Code is Essential in Underperformance Cases

The ACAS Code of Practice sets out expectations for investigation, warnings, evidence, employee participation, time to improve and the right to appeal. Tribunals can increase or decrease compensation by up to 25 per cent if either party unreasonably fails to follow the Code.

Capability procedures must be gradual and supportive, and should include a clear improvement plan, fair review meetings and enough time for the employee to demonstrate improvement. In many roles, a fair process is unlikely to be completed in less than several months.

Gov.uk formal procedure guidance also confirms that capability dismissals should only occur after warnings and evidence that improvement has not been achieved.

The Capability Process: How to Dismiss Fairly for Underperformance

A capability based dismissal must follow a methodical and well evidenced process. Both ACAS and gov.uk explain that capability procedures should support the employee and give them a fair opportunity to improve before dismissal is considered. Performance cases require a longer and more structured approach than conduct cases. Capability issues are often rooted in skill, confidence, workload or health factors, which means the employer must investigate, support and review performance over time rather than rushing to a disciplinary outcome.

This section sets out the expected stages in a compliant capability procedure.

5. Identify and Evidence the Performance Issue

A fair process begins with evidence. This step is required under the ACAS Code and is reflected in the public guidance on gov.uk regarding capability dismissals. Employers must gather clear and factual examples of underperformance, which may include:

• Missed targets or service standards

• Customer feedback or complaints

• Errors in task completion

• Job reports that show inconsistency or lack of detail

• Training records or skills assessments

• Consequences for safety, deadlines or customer satisfaction

Before progressing, you must consider whether the situation reflects an inability to meet expectations or a refusal to do so. Capability concerns arise when someone is trying but struggling. Conduct concerns involve wilful behaviour.

6. Hold an Initial Informal Meeting

ACAS encourages employers to start with informal conversations. This stage helps prevent surprises, supports the employee and strengthens trust. During this meeting, the employer should:

• Share the concerns with specific examples

• Explain the standards the role requires

• Give the employee the opportunity to explain their perspective

• Offer initial support or training

• Agree what will happen next

You should keep a note of the discussion even if it remains informal. A process that skips early conversations or moves straight into sanctions can undermine the implied duty of mutual trust and confidence, which increases the risk of a constructive dismissal claim. Unjustified performance plans and excessive workload as potential breaches of this duty.

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7. Investigate Possible Underlying Causes

The ACAS Code makes clear that employers must investigate underlying causes before taking formal action. Performance can sometimes reflect ill health, disability or structural challenges rather than lack of effort.

Areas to explore include:

• Health or medical issues that may require reasonable adjustments

• Training gaps or onboarding issues

• Problems with equipment, scheduling or workload

• Conflicts at work or unresolved grievances

• Lack of clarity in instructions or expectations

• Changes in role responsibilities without adequate support

If an employee raises a grievance during this stage, it should be handled under the ACAS grievance procedure. Proper grievance handling is crucial, and this includes a thorough investigation, confidentiality throughout the process, and impartial decision making.

A failure to resolve a related grievance can weaken the fairness of any later dismissal.

8. Invite the Employee to a Formal Capability Meeting

If performance remains below standard after informal steps, the next stage is a formal meeting. The employer should provide:

• Written notice of the meeting

• A clear summary of the performance concerns

• Evidence supporting each concern

• Information about the potential outcomes

• Details of the right to be accompanied by a colleague or trade union representative

ACAS and gov.uk both confirm that employees must be allowed to present their version of events and respond to the evidence.

This meeting is not a disciplinary hearing and should maintain a supportive tone. It is an opportunity to discuss performance concerns in detail and explore what support is needed.

9. Set Up a Performance Improvement Plan (PIP)

A PIP is one of the most important parts of the capability process. It should be clear, structured and designed to help the employee improve. Employees must be given warnings, support and time to reach the required standard.

A well designed PIP includes:

1. Clear objectives

2. Measurable performance standards

3. A plan for training, coaching or supervision

4. A timetable for improvement, usually eight to twelve weeks depending on the role

5. Dates for review meetings

6. Confirmation of the consequences of not reaching the required level

Tribunals look closely at the quality of the PIP. If objectives are unclear or unachievable, the dismissal may be seen as unfair.

10. Conduct Review Meetings Throughout the PIP Period

Regular review meetings are essential. These meetings help document progress and demonstrate that you are actively supporting the employee. They should include:

• Feedback on performance since the last meeting

• Discussion about any challenges that remain

• Consideration of whether further support is required

• Confirmation of next steps

Capability procedures often require several months to complete, particularly in roles that demand complex skills. A rushed process is unlikely to be reasonable.

Employees should be allowed to raise concerns at any stage. A PIP is a collaborative process, not a formality.

11. Invite the Employee to a Final Capability Hearing

If performance still fails to reach the required standard after the review period, the employer may move to a final capability hearing. This is a formal stage where dismissal becomes a possible outcome. The employee should receive:

• Written notice of the meeting

• A summary of the PIP results

• All evidence gathered throughout the process

• Confirmation that dismissal is being considered

• The right to be accompanied

During the hearing, you should consider:

• Whether the employee has improved

• Whether the support provided was adequate

• Whether the standards were reasonable

• Whether any adjustments have been fully explored

• Whether redeployment or alternative roles are available

Tribunals expect employers to consider alternatives before dismissal, especially where the employee has shown some improvement.

12. Decision, Notice and Exit Arrangements

If you decide to dismiss, you must confirm the decision in writing. This letter should explain:

• The reason for dismissal

• The date the employment will end

• The notice period and whether the employee will work it

• The right of appeal

Statutory notice applies unless the contract provides for longer periods. Statutory notice for employees with between one month and two years of service is one week, and this increases by one week for each full year of service up to a maximum of twelve weeks.

Capability is not misconduct, which means notice must be paid. Employees are also entitled to accrued holiday pay and any other contractual entitlements.

A fair process must include a right of appeal. ACAS and gov.uk both highlight that the appeal should be heard impartially, ideally by someone more senior or not previously involved.

Offering an appeal is essential. Without it, the dismissal is unlikely to be considered fair even where the evidence of underperformance is strong.

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13. Avoiding Constructive Dismissal Claims During a Capability Process

Constructive dismissal occurs when an employee resigns in response to a fundamental breach of contract by the employer. A breach may be an unauthorised change to job duties, failure to pay salary, a reduction in contractual entitlement or a breach of the implied duty of trust and confidence.

Examples relevant to capability processes include:

• Unreasonable or unjustified performance plans

• Excessive workloads that cannot realistically be met

• Ignoring or mishandling grievances raised during the process

• Failing to investigate concerns raised by the employee

• Making significant changes to role expectations without discussion

• Rushing a capability process without allowing time to improve

Both ACAS and gov.uk stress the importance of acting reasonably and communicating clearly throughout any formal procedure. Employers should listen to concerns, consider adjustments where appropriate and avoid creating unnecessary pressure. A well structured capability process is one of the most effective ways to prevent constructive dismissal allegations.

14. Handling Grievances During a Performance Process

Employees may raise grievances while a capability process is underway. ACAS guidance states that any grievance that relates to the capability process itself should be addressed promptly through the formal grievance procedure. The employer must follow the ACAS Code of Practice, which includes:

• Investigation by someone impartial

• Confidential handling of evidence

• A fair hearing

• The right to be accompanied

• Written outcomes and recommendations

• The right of appeal

If the grievance raises issues that could affect the fairness of the capability process, the employer should pause the capability procedure until the grievance has been explored. Examples include concerns about bullying, discrimination, health issues or unclear expectations. A failure to pause can undermine the fairness of the entire dismissal process.

15. Common Mistakes Employers Make in Capability Dismissals

Tribunals often find dismissals unfair not because underperformance was absent, but because the employer failed to manage the process correctly. Based on ACAS guidance and gov.uk resources, the most common mistakes include:

1. Lack of Early Conversations

Some managers move directly to formal action without informal support. This can appear heavy handed and inconsistent with the ACAS Code.

2. Vague or Unmeasurable Standards

Employees must know exactly what is expected of them. Objectives must be specific, measurable and achievable.

3. Unrealistic Timescales

It is rarely fair to complete a capability process in less than several months, especially in roles that require complex work.

4. Failure to Investigate Underlying Causes

Health issues, training gaps or personal circumstances may require reasonable adjustments or support. ACAS and Tribunal case law expect a genuine investigation.

5. Not Following Internal Procedures

Employers should follow their own capability or performance policies. Failing to do so can lead to unfair dismissal findings even where performance concerns are valid.

6. Inadequate Documentation

A lack of notes, inconsistent evidence or poor record keeping makes it difficult to defend a dismissal. Clear documentation strengthens credibility.

7. No Consideration of Alternative Roles

Before dismissal, employers should consider whether any suitable alternative role is available. This is highlighted in ACAS guidance and often referenced by tribunals.

8. Failing to Offer an Appeal

An appeal is essential in demonstrating procedural fairness. Its absence undermines the entire process.

16. Using Settlement Agreements as an Alternative Route

There are occasions where it may be appropriate for an employer to offer a settlement agreement instead of continuing with the capability process. These agreements allow both parties to end the employment relationship by mutual consent and typically involve:

• A negotiated financial payment

• Agreed reference wording

• Waiver of claims

• Confidentiality clauses

• Non disparagement commitments

Settlement agreements must meet certain legal standards. The employee must receive independent legal advice for the agreement to be valid. ACAS provides guidance on the use of these agreements and stresses that discussions should be handled sensitively and without undue pressure.

A settlement agreement is not a replacement for a fair process. However, it can be a practical option where:

• There is a breakdown in working relationships

• The employee wishes to exit voluntarily

• Both parties would prefer a dignified or timely resolution

Well drafted agreements create clarity, reduce risk and often support a smoother transition for both sides.

17. What Happens if the Employer Fails to Follow the Correct Process

If a capability dismissal is handled poorly, the risks include:

• An unfair dismissal claim, if the employee has two years of service

• A discrimination claim, which can be brought at any time

• A constructive dismissal claim, if the employee resigns because the employer breached the contract

• An uplift of up to 25 per cent in compensation for failing to follow the ACAS Code

• Damages for breach of contract or unpaid notice

• Reputational damage and potential disruption to team morale

Ensuring compliance with ACAS guidance, internal policies and statutory obligations is the most reliable way to reduce exposure to claims.

18. Ireland Compliance Summary (For Organisations Operating in Both Regions)

While this article focuses on UK law, employers working across the UK and Ireland must be aware that Irish employment law has its own statutory framework. Performance management in Ireland follows a broadly similar structure to the UK, but there are key differences that affect dismissal risk.

The following points summarise the areas of Irish law that matter most when managing capability concerns.

1. Unfair Dismissals Act 1977–2015

In Ireland, the Unfair Dismissals Act protects employees with 12 months continuous service, not two years as in the UK. Capability is a potentially fair reason for dismissal, but only when a fair procedure has been followed.

2. Fair Procedure Requirements

The Workplace Relations Commission (WRC) expects employers to:

• Set out performance concerns clearly

• Give the employee a chance to respond

• Provide training or support

• Allow reasonable time to improve

• Hold review meetings

• Invite the employee to representation

• Provide reasons for any decision

• Offer the right to appeal

These steps mirror UK expectations but are enforced under different legislation.

3. The Code of Practice on Grievance and Disciplinary Procedures

The Irish Code of Practice requires employers to use a structured, staged procedure, with written warnings, full investigations and impartial decision making. It has similar standing to the ACAS Code in the UK, meaning tribunals (the WRC and Labour Court) will refer to it when deciding fairness.

4. Notice and Payment Requirements

The Minimum Notice and Terms of Employment Acts set out notice periods that apply unless the contract provides longer periods. Notice must be honoured in capability-based dismissals unless there is gross misconduct.

5. Importance of Documentation

As in the UK, the WRC places significant weight on documentation, consistent standards and evidence that the employee was treated fairly. Employers should retain performance notes, emails, PIP outcomes and records of support offered.

This high level summary helps ensure your process does not expose the organisation to unnecessary risk when managing staff in Ireland.

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19. UK and Ireland Compliance Checklist for Capability-Based Dismissals

This checklist is designed as a simple, practical reference tool for field service employers. It reflects the requirements of UK law, ACAS guidance, credible government resources and the Irish WRC framework.

Employers can use this as a step-by-step process when handling underperformance.

1. Before Starting the Process

✔ Confirm the issue is capability rather than conduct
✔ Gather evidence of performance concerns
✔ Check the employee’s length of service
✔ Consider whether discrimination, health or personal circumstances are relevant
✔ Review the employee’s contract and internal performance policy
✔ Ensure the concerns have not arisen from unclear expectations

2. Informal Stage

✔ Hold an informal meeting to discuss concerns
✔ Explain standards and expectations clearly
✔ Ask the employee for their perspective
✔ Identify training or support needs
✔ Document the conversation

3. Investigation Stage

✔ Explore whether health, disability or personal issues are impacting performance
✔ Consider whether adjustments are required (UK Equality Act and Irish Equality Acts)
✔ Review workload, systems or scheduling issues
✔ Investigate any grievances raised in line with ACAS or Irish Codes of Practice
✔ Document findings objectively

4. Formal Capability Meeting

✔ Send written notice with evidence attached
✔ Explain potential outcomes and rights to representation
✔ Allow the employee to respond fully
✔ Record the discussion in writing

5. Performance Improvement Plan (PIP)

✔ Set clear and measurable objectives
✔ Provide training, shadowing or coaching
✔ Agree a reasonable improvement period (typically eight to twelve weeks or more for complex roles)
✔ Schedule review meetings
✔ Confirm the plan in writing

6. Review Meetings

✔ Deliver constructive feedback
✔ Adjust support where necessary
✔ Document progress and concerns
✔ Allow the employee to raise issues

7. Final Capability Hearing

✔ Notify the employee in writing
✔ Provide all evidence and PIP results
✔ Consider support provided, progress achieved and role expectations
✔ Assess redeployment possibilities
✔ Ensure a fair and impartial panel
✔ Record the decision carefully

8. If Dismissal Occurs

✔ Confirm the decision in writing
✔ Provide statutory or contractual notice
✔ Pay outstanding holiday or contractual entitlements
✔ Provide the right of appeal
✔ Keep all records for future reference

9. Ireland Only (Additional Checks)

✔ Ensure the employee has at least 12 months service before applying the Unfair Dismissals Acts
✔ Follow the Irish Code of Practice on Disciplinary and Grievance Procedures
✔ Apply WRC procedural fairness standards
✔ Provide representation rights at each formal stage
✔ Carry out full investigations before any sanction

Maintaining Fairness and Protecting Your Business

Managing underperformance is rarely straightforward, but a consistent and fair capability process protects both the organisation and the employee. For field service businesses, where service quality relies heavily on each technician or operative, early intervention and clear standards can prevent problems from escalating.

When dismissal becomes necessary, adherence to ACAS guidance, credible government frameworks and the organisation’s own policies provides the strongest protection against legal claims.

A well documented, fair and supportive process is not only a legal requirement but also a reflection of professional and responsible management. It helps maintain trust within the team and supports a culture where expectations are clear and performance is taken seriously.