Written by Nicole Evans, Senior Associate

Everyone knows a happy workplace is a productive workplace. This is a mutually beneficial arrangement for both employers and employees. Employees who are performing well produce better results, which in turn, results in more revenue. If your employees are underperforming, you may have unhappy clients and customers, high staff turnover and decreased revenue.

If your employees are not doing their work properly, are not following your rules or are speaking negatively about your business then this type of poor performance can have a disastrous effect on your business. Similarly, if your employees are causing a risk to the safety of your clients, or are stealing from you, or worse still, they are drinking or taking drugs at work, then they may be guilty of serious misconduct.

So what do you do with employees who are not performing?

You need to know what steps you need to take to manage your employee’s underperformance or misconduct, whilst protecting your business from an unfair dismissal claim. Here are some tips to help you achieve this:

  • The first step to dealing with an underperforming employee is to communicate with them your concerns. You can arrange a meeting with them and put your concerns in writing, including clear expectations of their role.
  • You should tell the employee what the meeting is about, so they have the option to bring a support person to the meeting.
  • In the meeting, you can address any issues that you or your employee have, and come to an agreement on how to resolve these issues and set KPIs to track their progress.
  • You may be able to provide them with strategies to help them improve their performance. Perhaps you can provide them with more training or change their role?
  • Organise to hold regular meetings with your employee to show your support and monitor their progress. At the end of the meeting, ensure you have a document which you and your employee agree on, which outlines what you have discussed during the meeting and your clear expectations moving forward.
  • If you find that you have several employees underperforming, then it might be a good idea to write a performance management policy, which sets out the process and possible consequences for underperformance. This may also ensure that if you only have one employee underperforming, they don’t feel victimised.

What should you do if they continue to underperform?

After providing your employee with ongoing support you still find that their performance hasn’t improved then you may decide to have another meeting to discuss the ongoing issues and issue a first or additional warning. You should clearly explain to your employee the possible consequences of their continual underperformance – including a termination of their employment.

Termination of an employee is a serious step and should only be considered if you think you have no alternative. Before you terminate an employee, you may give them warnings in writing. You don’t have to give three warnings, or even one warning, but you should give the employee the opportunity to correct any performance issues before ceasing their employment. Whether this occurred, is often taken into consideration by the Fair Work Commission, when determining if an employee has been unfairly dismissed.

If you think you have no other option but to terminate the employment of your employee, then you should make sure you are clear about the reason for their termination. Upon termination, you will be required to give your employee written notice of their last day of employment. You may terminate an employee during their leave, but the correct amount of notice still needs to be given.

Notice can be paid out to an employee instead of being worked. As an employer you can either have your employee work out their notice period or pay it out to them to leave immediately (pay in lieu of notice). If you pay out the notice, then you must pay your employee the full amount as if they had worked until the end of their notice period. This also includes bonus and commissions, loadings, overtime and penalty rates.

Termination in a misconduct situation

In the case of serious misconduct, you can dismiss any employee without notice or warning if you believe that your employee has engaged in serious misconduct. Serious misconduct includes things such as theft, fraud, violence and serious breaches of occupational health and safety procedures. You are still required to pay the employee all outstanding entitlements such as payment for time worked or annual leave.


Sometimes an employee’s role is no longer required in a business and you make that role redundant. To be a genuine redundancy, the employer no longer requires the employee’s job to be performed by anyone because of changes in the business’s operational requirements. If you can move the employee within the business, then this may not be a genuine redundancy.

Exemptions From Unfair Dismissal Laws

There are some types of employees who are excluded from unfair dismissal laws; for example, contractors, people employed under a contract of employment for a specified period of time or task, and trainees who are dismissed at the end of a training arrangement.

The Process of an Unfair Dismissal Claim

If your former employee makes an unfair dismissal application in the Fair Work Commission, what will become relevant is whether the dismissal was harsh, unjust or unreasonable. To make a claim the employee must be covered by the national unfair dismissal laws, in that they work for an employer with more than 15 employees and a private enterprise. The application must be lodged within 21 days after the dismissal takes effect.

If your business has less than 15 employees, then the Fair Work Act 2009 defines you as a small business. This means that you are governed by the Small Business Fair Dismissal Code. Small business employees cannot make a claim for unfair dismissal in the first 12 months following their engagement. If an employee is dismissed after this period and the employer has followed the Code then the dismissal maybe deemed to be fair.

Before terminating any employee, you should obtain independent advice from an employer association or lawyer.