HR Consulting

Managing Employee Termination Risk


Why is this important?

Terminating the employment of a member of staff as a consequence of poor performance can be fraught with danger.

Apart from the risks associated with terminated employees seeking recourse under relevant provisions of the Fair Work Act, businesses terminating staff may also experience negative impacts through suffering damage to their reputation and the diversion of often significant resources to defend claims made against them.

While it can be difficult to eliminate the risks entirely, undertaking an appropriate process in advance of the termination can significantly reduce the risks.

What to do

Consider the following tips:

1. Ensure you are able to demonstrate that the employee has been made aware of the expectations/standards required (via an up-to-date position description, regular performance reviews, specific and documented conversations about what is required, for example).

2. Ensure there is evidence that the employee has been made aware of shortfalls on at least a couple of occasions (via previous performance review discussions, verbal warnings evidenced by diary notes plus at least one written warning, for example).

3. Ensure you are able to demonstrate that the employee has been offered reasonable support to achieve the expected standard of performance (time and/or reasonable access to training if needed, for example), and that they have been given an opportunity to explain any other issues that might be temporarily impacting performance. A reasonable period of time needs to be made available for the employee to achieve the standard required.

4. Once you get to the point of having formal meetings with the employee regarding their performance, give them adequate notice (minimum 24 hours), ensuring they are aware that the meeting is to discuss performance issues and, particularly if termination is at some stage a possibility, offering them the opportunity to bring an observer (note: lawyers acting in a professional capacity are specifically excluded from this role). It is generally wise for the employer to also have an observer in attendance.

5. When discussing performance issues it’s important to not be seen to pre-empt the outcome. Discuss the issues, seek an explanation and, if the explanation is not sufficient, then formulate and issue a formal warning after the meeting.

6. Formal warningsshould include details of the standards to be achieved, any support that has been or will be made available, other relevant issues discussed, the date on which performance will be again reviewed and the possible consequences of not achieving the required standard (up to and including termination of employment, if indeed this is a possibility). The employee should also be provided with a further opportunity to formally respond to the issues raised. The precise details of standards to be achieved could be documented in a PerformanceImprovement Plan or similar.

7. Have the employee sign as having received and understood the relevant documents (they don’t have to agree with your assessment, just acknowledge their receipt and understanding). If they refuse to sign, make a note to this effect on the documentation.

8. If the matter does proceed to termination, ensure that reasons for the termination are clear, that the termination is confirmed in writing and that requirements relating to providing adequate notice of termination are met.

Businesses may be able to ‘shortcut’ the above process in certain cases such as in the event of serious misconduct and/or where an employee is to be terminated early on in their employment.

This article provides general information only. Employers are encouraged to seek professional support that takes account of specific requirements.