Why SMEs need a disciplinary policy – including managing conduct and poor performance issues separately

In this week’s article we look at the disciplinary policy, the legal requirement to have one / the consequences of not having one, and how to access the CIPD’s model policy document so you can be sure to comply with the legal requirements in this area.

We then cover why it is important to have a section or even a separate policy for short service employees along with ensuring that your policy covers both conduct and performance issues – as these need to be treated separately rather than all included under ‘behaviour’.

Although there are very few specific legal obligations for employers when taking disciplinary action, having a disciplinary policy is one. The main requirements of an organisation’s policy and also taking disciplinary action in general are contained in the ACAS Code of Practice (see www.acas.org.uk), which employment tribunals take into account when deciding on the merits of any cases and the process followed by the employer. Tribunals expect companies to have followed the ACAS Code and generally find against them if they haven’t.

In summary, it is a legal requirement to have a policy and, although there is no stated legal obligation to follow the ACAS Code, failure to do so would mean an employer is likely to lose an employment tribunal if they don’t. They also risk any compensation awarded to the Claimant being uplifted by up to 25 percent for failure to follow a reasonable process, so following the Code is a bit of a no-brainer!

Disciplinary policy

The disciplinary policy underpins the employment relationship, enabling companies to set out clear rules informing employees how they need to behave whilst at work, and the standards it expects of them.

It also outlines the process that will be followed if employees fail to do this, and the method by which the employee will be able to explain their actions in a disciplinary hearing before any decision is taken by the disciplining manager.

The policy should support managers to carry out this difficult task fairly, legally and to facilitate them improving the conduct and performance of individuals who are subject to disciplinary action to the required standards.

Where this is not possible and the individual needs to be dismissed the policy should specify the processes and documentation that managers need to follow to do this. Clearly, such a process needs to be carried out fairly, professionally, and in a way in which the organisation should be able to avoid, or at least strongly defend, tribunal claims from any disgruntled ex-employees.

According to CIPD the disciplinary policy for SMEs should include the following sections:

• Purpose and scope of the policy
• Investigation of the allegations
• Informal pre-disciplinary discussion
• The disciplinary procedure
  • First written warning (step one)
  • Final written warning (step two)
  • Dismissal or action short of dismissal (step three)
• Gross misconduct
• Appeals
• Third parties

For a comprehensive guide to taking disciplinary action, including CIPD approved model policy documents please see the 186hr ‘Practical Guide to Disciplinary Action’. It includes detailed explanations of each stage of the disciplinary process, CIPD approved model letters covering every eventuality of each stage, along with 2 hours of telephone-based consultation with a highly experienced, highly CIPD qualified senior HR professional, click here for details. The guide is compliant with the ACAS Code of Practice and costs £249 plus vat.

Do SMEs really need to have a policy? It sounds very official!

Unfortunately HR issues such as this are one of the negatives of running a small business. The good news is that for a low monthly fee 186hr can provide you with advice and all the documentation you will need, allowing company bosses to get on with what they do best. Please contact us if you would like to discuss the options available, starting at £300 per month including advice, and all documentation adapted specifically to your company’s needs.

As you will be aware, all employees must be given an employment contract by law. Or, as a minimum, they must receive a written Statement of Terms and Conditions of Employment within a certain period after starting their employment.

If you have not issued such a document to all employees, or your documentation has not been updated recently please contact us The cost would be £300 for producing a basic Statement of Terms and Conditions of Employment (STCE) that is specific to your organisation, or £500 for a full employment contract.

Whichever document you issue, it is a legal requirement that it must either contain disciplinary rules and procedures or refer the employee to some other easily accessible document regarding disciplinary action such as a company policy that contains the required rules and procedures.

Most organisations have a separate disciplinary policy and simply refer to it in their contracts / STCEs rather than including details in the document itself, for good reason. We strongly recommend that all employee policies, especially the disciplinary policy, should be separate to the contract / STCE and clearly labelled as non-contractual. This avoids the following two disadvantages of having policies that are contractual:

1. If you don’t follow the policy to the letter when taking disciplinary action then even individuals with short service, who cannot normally apply to an employment tribunal until they have worked for you for two full years, can sue the company in court for a breach of contract for failing to comply with a contractual term.
2. If you wish to change the policy at some point then, as it is contractual, to do so you’d need to consult with all employees regarding the changes, a time-consuming process that can lead to unintended consequences. If the policy is non-contractual you can simply amend the policy and inform employees of the changes.

If your disciplinary, or any other employee policies e.g. the grievance policy, are contractual at present we would strongly advise that you consult with the workforce about making them non-contractual. This is relatively straightforward to do, unless you operate in a heavily unionised environment, or we can do it on your behalf on a consultancy basis.

The CIPD recommended disciplinary policy

If you don’t currently have one or would like to update your existing disciplinary policy 186hr can provide either the CIPD recommended disciplinary policy for smaller organisations or their recommended policy for medium to large sized organisations, both for £100 plus vat.

If the CIPD (see www.cipd.co.uk) wording is not right for your organisation we can adapt it to your needs. For example, their recommended policy for smaller companies does not include a verbal warning option. We would be happy to include this in your policy if you would prefer to have it as an option in your process.

Shorter disciplinary process for employees with under 2 years’ service

Surprisingly, as we would highly recommend it, most disciplinary policies we have seen (including both of the above-mentioned model CIPD policies) do not include a ‘Short Service’ section. It is a truncated version of the full policy and normally involves shortening the process to a written warning and then dismissal for employees with under 2 years’ service rather than having to follow the usual 3 or 4 warning process.

It is perfectly legal to have such a policy and is a way of removing unsuitable employees who have short service from the business. It is especially useful for parting company with those employees we have all come across who do really well during their probationary period but then go seriously downhill in terms of attitude and performance once they have passed!

The need to separate ‘conduct’ and ‘performance’ issues

Although the processes for taking disciplinary action for both conduct and poor performance are very similar the ACAS Code states that they are to be treated separately, so it is important to distinguish between the two right from the start and be clear with the individual whether the action you are taking against them is related to their conduct or their performance.

Failure to do so will severely weaken an organisation’s defence of any actions they take – and their prospects of successfully defending a claim at tribunal.

Examples where the disciplinary policy for conduct would apply are:

• Poor timekeeping,
• Unauthorised absence,
• Misuse of company property,
• Failure to follow company procedure.

Examples where the disciplinary policy for poor performance would apply are:

• Failure to achieve target,
• Not adhering to company service standards,
• Not achieving the required activity levels.

It is not unusual for an individual to have issues with both their conduct and their performance at the same time. If that is the case then they still need to be separated in terms of the outcomes of the process e.g. disciplinary warnings for both issues. However, both can be dealt with by the same disciplining manager, in the same hearing, and the disciplinary outcomes can be confirmed in the same letter.

Frustratingly, with the two processes needing to be separate, if an individual has had conduct issues in the past and has e.g. a live written warning on file, if they then have a performance issue this would not result in a final written warning being given due to the accumulation of previous warnings. In these circumstances the individual’s written warning for conduct would remain on file and they would in addition be given the relevant warning for performance as if the conduct warning had not been issued.

The above 186hr guide contains CIPD recommended model letters for both conduct and performance. Please contact us for further details.

We hope this has been a useful article. If you would like to discuss disciplinary action, or any other HR matters, further please contact us