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Updated for 2024

Capability Policy (ACAS Compliant)

...For When Your Staff Don't Perform

Capability Procedure

Capability issues, where an individuals performance consistently falls short of the required standard, may arise because an employee does not have adequate training, or is unable to do the work to a satisfactory standard for another reason. An employer must try to identify the reason and give appropriate support, prior to invoking a formal procedure which could lead to a capability dismissal. This must be considered separate from any conduct issues where the individual deliberately behaves in a way which means he does not reach the performance standard required. This would be dealt with using the Company Disciplinary Procedure.

I have a member of staff who can't meet his sales targets - can't I just sack him?

Well you could, but it would be much more advisable to deal with this as a capability issue and seek to improve his performance prior to terminating his employment. This would also provide you with a level of protection should the individual claim unfair dismissal at an Employment Tribunal.

OK where do I start?

Well if you have a company Capability Procedure then you should work through it - you can download a comprehensive procedure below. If you don't have a procedure or if you are a very small business and such a procedure would be overkill, then read on.

- clarify his targets

Make sure that you have set clear targets for the individual concerned and that these are in writing. Also ensure that you have carried out several informal reviews of these targets with the individual and explored what you can do to help him meet them. For example does he need additional training or are there any other reasons why he is not meeting the targets. It is very important that you can demonstrate that you have supported him in attempts to improve.

- set up a formal review meeting

Write to him stating that following several informal reviews, you now wish to formally review his performance and the reasons for his consistent failure to meet his targets. You should also give him the right to be accompanied by a work colleague or trade union representative.

At the meeting you should go through the issues and allow him the opportunity to state his reasons. Following the meeting you should write to him stating the outcome which is likely to be the issue of a warning that he has failed in his performance in relation to meeting his targets, you would be monitoring his future performance (over say 1-3 months depending on your business cycle), and you would wish to meet with him again after this period to review the situation. Make sure he has clear written targets which you can monitor, and ensure you provide any training or assistance identified at the meeting to help him improve.

What if he doesn't improve?

After the review period you would again write to him setting up a meeting to review performance. Again offer him the right to be accompanied. Go through the same process as the last meeting, and at the end (assuming he has not met targets) you should issue him with a final warning that if he again fails to meet his targets within a reasonable review period – 1-3 months, then it is likely that you would need to terminate his contract of employment.

...and no improvement after that?

After the review period, write to him again setting up a review meeting. In the letter offer him the right to be accompanied, and re-iterate what you wish to discuss, and that should he have failed to meet the agreed performance targets the outcome could be dismissal. So there should be no surprises during the meeting.

At the meeting you should obviously allow him to explain why he has under-performed. However if you are of the view that he has failed in his performance again, you should terminate his contract with the appropriate notice (which you might want to pay in lieu). You should write him a formal letter of dismissal outlining the reasons for terminating his contract. It is also good practice to give him a right to appeal against your decision to dismiss.

Free Policy and Document Downloads

Capability Policy (ACAS Compliant)
which can be downloaded and adapted for your organisation. The procedure contains a "Performance Improvement Plan" (Capability Plan) template.

Managing Challenging Conversations
Dealing with capability issues often involves having difficult conversations with the member of staff concerned. This is the Acas guidance note on how to manage such conversations.