Employee performance management

Last updated: December 2020 | 3 min read
In this article

Effective management of employee performance should help your business achieve its goals, while keeping employees motivated and productive.

Good processes can provide justification for employment decisions like pay reviews, bonuses, promotions, and warnings and dismissal. They also allow an employer to be transparent and consistent for all employees, which helps avoid claims of discrimination, constructive dismissal and other grievances.

An employer can decide what the organisational goals are, and how these translate to individual goals and performance targets. These objectives should be SMART (Specific, Measurable, Achievable, Realistic and Time-related). Setting out objectives in writing (such as in organisational presentations) and having business policies in place can be helpful to establishing fair and consistent treatment.

Objectives can be challenging, provided that they are achievable.

Standards should be consistent between employees in similar level positions across the organisation. If a team leader sets the goals of the team, it is a good idea to provide management training to the leaders in setting goals and to conduct a comparison of goals of leaders.

Employees who are under-performing should be given warnings. The timescale between performance appraisals, and therefore warnings, should be sufficient to allow improvements to be made and measured.

Rather than giving warnings, you may reduce performance related pay. However, the employment contract must state that the employer has this right, and total pay cannot be reduced below the minimum wage.

Performance warnings

ACAS provides guidance about performance warnings. The process is similar to that for disciplinary actions. You may also need to look at business policy regarding discipline and performance.

For a minor problem, an informal discussion about performance may be more appropriate and easier to carry out. This may be a follow-up from a performance review.

For serious under-achievement or negligence, a formal performance warning may be necessary.

The employee should be asked to attend a performance meeting by letter. At least 5 working days’ notice should be given to allow the employee to prepare.

The letter should explain the issue, the possible consequences and that the employee has the right to ask someone else to attend.

If the issue could be caused by a lack of support by the business, or by a lack of training, an employer should make this available. Otherwise dismissal may be unfair.

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