Removing underperforming employees with less than 2 years’ service from your business

It seems from my discussions with companies in recent weeks that, in line with my latest blog articles, thoughts are moving towards planning for when the Covid restrictions ease.

The topic I have been asked about most involves employees who do not have the best attitude or performance, and have worked for the company for a relatively short period, generally under 2 years and the employer wishes to tackle the behaviour and ideally part company with the individual.

The evidence, albeit from a small sample, suggests that whilst we all acknowledge that it has been an incredibly difficult time for everybody, those employees who are less committed to their employer seem to have used the crisis and restrictions as an opportunity to swing the lead a little, despite continuing to be paid for doing their job and employers falling over themselves to be reasonable and supportive.

Clearly if an individual is under performing this should be tackled in a structured and supportive way – the employer recruited the individual for a reason and they are still the same person so attempting to improve performance or attitude should be the first port of call when tackling the problem. To help with this I will shortly be producing a ‘managing poor performers’ article on my website that will include a proven process to tackle poor performers that has worked well for several organisations I have worked with over the years.

However, for the purposes of this article we will assume that attempts have been made to improve the employee’s attitude or performance and now the employer wishes to part company. There are several ways to do this, as follows:

Probationary Review

Most employers have a probation period for new employees whereby if an employee proves unsuitable in the first 3 or 6 months the contract of employment allows them to be dismissed, normally with only 1 week notice.

There is often a dilemma when a probationary period is coming to an end for a borderline employee and in my experience employers often give the individual the benefit of the doubt and allow them to continue working.

However, history shows that the employer often ends up regretting this decision at some point in the future. Because of this, although harsh, our advice is that as long as you have supported, trained and managed the individual to a good standard during the probation period, if you are not sure about them after 3 or 6 months you should fail their probation and recruit a better alternative. You have given them every chance to shine and if they are not where you expected them to be by this point they are unlikely to get there. 

Most contracts allow for the probation period to be extended, normally by up to 3 months and this can be a useful option although for me it should only be done in exceptional circumstances where the employer is genuinely undecided or the individual hasn’t had the support they needed e.g. due to the current Covid restrictions. Often an extension can be a cop out as generally, 3 or 6 months should be easily long enough to form a view as to the employee’s suitability.

If you do decide to dismiss an employee either during or at the end of their probation period, remember to follow the contractual terms and your policy e.g. a meeting must be held with the individual although at present this may need to be conducted via Zoom etc.

If you need a probation period policy document or model letters to invite the individual to a review, dismiss them, extend the probationary period or confirm they have passed their probation period please contact us as we have model documents for all these eventualities. We also have one to extend the probation period specifically due to Coronavirus issues if you need it.

The final thing to bear in mind regarding probationary reviews is to discuss a trap that most employers fall into at some point. That is allowing the probationary period deadline to pass and then decide the individual has failed their probation. If this happens, whereas the process is relatively straightforward you are likely to have to pay the amount of notice pay as if the probation period was passed. This often increases notice pay from one week to a month or even 3 months.

The unwritten rule here is that, by the end of the probation period if an employer has not told the individual they have failed their probation, and has not extended the probationary period then the individual will be deemed to have passed their probation and the employer will need to follow a different process to dismiss the employee. Therefore, although this is basic advice, organisations really should use diary systems to remind them to hold probation reviews on time every time. So many employers fall foul of this.

The consequences of not doing so are explained perfectly by the Przybylska V Modus Telecoms case. Przybylska was on holiday at the end of her 3 month probation period. Her contract stated that she would receive one week notice during the probation period but 3 months afterwards. When she returned from holiday the company met with her and failed her probation, dismissing her with one week notice pay. She raised a claim at Tribunal, who decided that she was entitled to the full 3 months pay. The Tribunal found that the employer was aware of the holiday and had the opportunity to tell her that it was extending the probation period until after she came back but failed to do so, so the deadline was missed. Modus Telecoms appealed the decision but lost. A very expensive error in terms of notice pay and also legal costs.

Short Service Dismissal Procedure

Whereas most managers will be familiar with the standard disciplinary process of verbal warning, written warning, final written warning and then dismissal, it is possible to dismiss an employee who has passed their probation but has less than 2 years’ service by following a much shorter process.

In order to do this it is important to ensure that your disciplinary and dismissal procedure is not contractual for such dismissals to be safe, as otherwise if the employer does not  follow the full process as per the contractual terms then it may be deemed to be a breach of contract and this allows the individual to make a claim even though they have less than 2 years’ service.

We would normally include a ‘short service’ section in an employer’s disciplinary and dismissal procedure to cover this issue to ensure both management and employees are aware of it, although having such a policy is not a ‘requirement’ in order to legitimately follow the shorter process.

Whereas it is possible to simply invite the individual to a meeting, hold the meeting and then dismiss after a suitable period of considering all potential outcomes of the process, we would normally advocate a sort of half-way process between the immediate dismissal option during the probationary period and the 4 stage dismissal process of the company’s disciplinary and dismissal policy. Our recommendation is to have a process of allowing one written warning prior to dismissal for employees who have passed their probation but have less than 2 years’ service.

This sits more comfortably with us and most employers we speak to and results in an increasing level of protection for employees, which is important to them. In summary the process would be that the employer is able to dismiss immediately during the probation period; follow this process of a warning and then dismissal for employees with up to 2 years’ service; before moving to the normal 4 stage process after the individual has 2 years’ service.

If you sometimes miss probationary reviews or find that once they have passed their probationary period some employees stop trying quite as hard then you may wish to add this option to your normal disciplinary policy. We can help with this wording, please contact us for details.

Even though employees don’t accrue full employment rights until they have 2 years’ service we would always advocate allowing an appeal against the dismissal decision for reasons of fairness, and normally include this in the ‘short service’ section of the disciplinary and dismissal policy for organisations we work with.

Disciplinary, Poor performance, and Capability Policy

Where the organisation has made their disciplinary and dismissal policy contractual then they may need to follow the normal 4 stage process even for short service employees as explained above, although you can normally jump straight to a written warning rather than starting with verbal, with some good quality HR advice, for employees who have less than 2 years’ service thus making it a 3 stage process to dismissal.

As a slight aside, we find that whereas most SMEs have a disciplinary policy, many we speak to are not fully aware that, although the processes are very similar, there should be different processes, policy wording and letters depending on whether the issue at hand is related to Conduct, Performance, or Capability. Ideally there will be separate sections in the employer’s disciplinary policy for Conduct issues and Performance issues whereas usually Capability, including dismissal for capability issues would be included in the absence policy.

If your employment contracts state that the disciplinary policy, or any other staff policies, is contractual, or if specific bonus details are included in a contract rather than simply stating that the individual is entitled to a bonus and details will be confirmed separately, we would advise that you review your employment contracts, change them for the future and consult with your existing workforce to change their terms in the near future so these items become non-contractual. It is likely to save you a great deal of work and money at some stage. Contact us to discuss the wording of your contracts and policies.

Protected Conversation resulting in a Settlement Agreement

The Employment Rights Act 1996 Section 111A introduced the Protected Conversation as a means of making an employee an offer to leave the organisation in return for an agreed compensation package without fear of a claim being made against them. The details are then put in a legally binding Settlement Agreement signed by both parties.

Clearly, offering a sum of money for someone to leave the organisation would normally be classed as Unfair Dismissal so this option can be very useful for employers and save both parties a considerable amount of time and stress.

However, for most exit conversations with employees who have less than 2 years’ service it is not necessary to use this legislation or to use a Settlement Agreement, as individuals need to have 2 years’ service to make an unfair dismissal claim, meaning such protection is not needed.

However, there are occasions where employers wish to be cautious and do everything possible to avoid a claim for certain individuals. Under those circumstances a Protected Conversation and Settlement Agreement may be the best option.

Please see my article https://186hr.co.uk/how-to-part-company-with-an-employee-who-just-doesnt-fit/ which we posted on 6 December 2020 for further details. Briefly, a Protected Conversation allows you to explain what, as an employer, you are unhappy with and offer a sum of money for the employee to leave their employment, along with a factual reference.

Anything that is said in the Protected Conversation cannot be quoted or even referred to in any subsequent court or Tribunal proceedings if agreement can’t be reached and the employee makes a claim. In fact normally it is not permitted to even mention that there has been a Protected Conversation during Proceedings.

If an agreement can be reached in the Protected Conversation then the details must be documented in a Settlement Agreement and signed by both parties. The organisation is required to pay for the individual to receive legal advice on the contents of the Agreement prior to signature. I normally specify a maximum fee of £350 for such legal advice and this has always been sufficient.

It is important to stress to the employee that they should explain this maximum payment to their solicitor, otherwise the invoice may end up being significantly higher.

Also, employers should be clear that they will only pay for the solicitor to explain the contents of the Agreement to the individual along with the implications of signing it i.e. that it prevents them from making a court or Tribunal claim against the employer.

If the employee wishes to take advice from the solicitor on the merits of the sum of money offered or their prospects of claiming against the company for Unfair Dismissal etc they are perfectly entitled to do so, but they will need to pay for that themselves i.e. employers do not need to pay for the employee to receive legal advice on whether they can sue you!

Finally, regarding Protected Conversations please remember that whereas it protects the organisation from claims of Unfair Dismissal, it does not protect against claims for discrimination.

Having said that, if agreement can be reached in a Protected Conversation then the resulting Settlement Agreement does protect the organisation against discrimination claims as, with a small number of rare exceptions, it prevents the employee from making claims against the company for any issues they were aware of at the time of signing the Agreement.

If you wish to hold a Protected Conversation with an employee and / or exit an individual via Settlement Agreement, at 186hr we are very experienced at this and would be happy to put together a legally compliant script for you to follow in the meeting. We also have a Settlement Agreement document that we can adapt to your specific needs and the circumstances of the individual case. All our documentation is legally compliant and will cost significantly less than employing a solicitor to do this for you.

We pay a specialist employment lawyer to update our base document each year, and we also update all letters and other documentation in line with CIPD advice through our paid for subscription of their ‘HR-Inform’ service.

Some Other Substantial Reason

There are 5 ways to legally dismiss an employee; conduct, performance, capability, redundancy and the little known ‘Some Other Substantial Reason’ (SOSR).

You will be aware that if an individual behaves in such a way that their actions are deemed to be gross misconduct they can be summarily dismissed via the gross misconduct section of the disciplinary policy that covers ‘conduct’. Summary dismissal means employment ends immediately and notice pay is not payable.

All other forms of dismissal require notice to be paid.

Although it is not usually a summary dismissal, where the actions of an employee are incompatible with the standards of the organisation, or where an individual just isn’t right for them it may be possible for an employer to dismiss them via SOSR.

It is quite rare to use SOSR as a reason for dismissal. It is normally used when there is an issue not covered by other policies but is so detrimental to the business that it can’t continue e.g. if there is a complete breakdown in trust between employer and employee, or certain people simply can’t work together.

It is also sometimes used where a customer or supplier refuses to deal with a specific employee and the organisation therefore needs to dismiss them and appoint someone else into the role in order to keep the business.

Before dismissing for this reason the organisation should look for alternatives e.g. moving the employee to a different department, or to look after different customers.

Unlike a normal disciplinary dismissal, there does not need to be a series of warnings that escalate the problem towards dismissal under SOSR but clearly the organisation should talk to the employee about the issues at the earliest opportunity and regularly thereafter before considering the drastic option of an SOSR dismissal.

Redundancy

Often, especially in SMEs, the need to part company with an employee forces a rethink about roles and what is really needed. It may be that the role the problem employee performs is not needed in its current form, in which case the organisation may wish to consider having a restructure where the individual’s role is made redundant and their work is then carried out by different people in different ways.

According to CIPD a role is redundant if ‘the requirements for employees to perform work of a specific type, or to conduct it at the location in which they are employed, has ceased or diminished, or are expected to do so’, making the above restructure scenario a genuine and compliant redundancy.

Please remember though, the company is at risk of a claim if they recruit someone into the same type of role within 3-6 months of the problem employee being made redundant.

We find that managers and business owners are often more comfortable making an employee redundant than dismissing them for performance, attendance etc reasons, and it shouldn’t cost any more than other forms of dismissal for an employee with under 2 years’ service as, unless you have an enhanced redundancy policy no redundancy payment will be payable. As with most of the above options, only the individual’s contractual notice would be payable.

Making one or a small number of redundancies is relatively straightforward and it is possible to carry out the process in around ten days although, for the sake of fairness, we advocate a two week process to ensure that the required consultation is shown to be ‘meaningful’. Although the individual may have been a problem and not shown the commitment you had hoped for, it will still be a difficult period in their lives and we would recommend a little compassion. Also you never know where the individual will end up next!

For further details on redundancies please see our free guide 8 Steps to Making Redundancies on our blog or view details of our complete Practical Guide to Making Redundancies below.

If you would like to discuss the issues covered in this article, or any other HR matters, please do not hesitate to contact us