Supporting Performance: Performance Management & Capability Policies for UK Businesses
When an employee isn’t meeting the standards expected of them, it can derail a small business. But dealing with underperformance isn’t just about output—it’s a high-stakes legal process.
Following the implementation of the Employment Rights Act, the historical two-year qualification period for ordinary unfair dismissal has dropped to 6 months. This means your business no longer has an extended “trial period” to see if an employee works out. If you do not have a robust, active performance management policy in place from their very first week, your business faces substantial risk at an Employment Tribunal.
Managing Employee Performance (Under the 6-Month Unfair Dismissal Rule and Beyond)
Because protection against unfair dismissal now kicks in at month six, the way small businesses handle poor performance must shift from reactive to proactive. You can no longer wait until an annual review to address a struggling worker.
If an employee is underperforming, an Employment Tribunal will look for clear evidence of procedural fairness. To safely manage or dismiss someone based on capability, you must be able to prove:
- The employee clearly understood what standards were expected of them.
- They were given clear, documented warnings that they were falling short.
- Your business provided measurable support, training, or mentoring to help them improve.
- They were given a reasonable, distinct timeframe to turn things around.
To keep your business protected and help your team thrive, Human Resource Solutions provides a suite of fully compliant, customizable performance and capability templates—completely free to download. These provide a clear pathway to follow to ensure you meet all your employer responsibilities.
Key Points: Managing Employee Performance
- Navigate the 6-Month Protection Window: With the qualifying period for unfair dismissal set to reduce to six months, our templates help you implement robust performance monitoring from day one to ensure suitability before statutory protections apply.
- Structured Onboarding & Induction: First impressions matter, but so does assessment. Use our Induction frameworks to set clear expectations and evaluate new hires effectively within the new, shorter legislative timelines.
- Compliant Absence Management: Stay ahead of the April 2026 changes with policies updated for Day-One Statutory Sick Pay (SSP), ensuring you manage health-related absence fairly while protecting your business productivity.
- Meaningful Appraisals for Growth: Shift from reactive management to proactive development with Appraisal templates designed to foster engagement, align staff with your goals, and provide the “Fair Work” evidence required by modern regulators.
- Clear Capability vs. Conduct Frameworks: Distinguish clearly between “can’t do” (Capability) and “won’t do” (Discipline) with step-by-step procedures that meet ACAS standards and reduce the risk of costly Employment Tribunal claims.
- Fair Work Agency Readiness: The new Fair Work Agency (launched April 2026) will have the power to inspect HR documentation; our templates provide the essential audit trail needed to prove you are a compliant and transparent employer.
Download Free Performance & Capability Policy Templates
Our templates are provided in fully editable MS Word formats, built to help you establish a clear, supportive framework for managing staff output.
Induction
Use these Induction Policy, Checklist and Evaluation templates to ensure that all employees have the benefit of a properly structured induction programme that will help them to integrate into their role in the organisation quickly and effectively.
Induction Policy
Induction Checklist
Induction Evaluation Form
Appraisal
Unlocking the full potential of your workforce requires a structured approach to performance development. Our Employee Appraisal & Review Templates provide SMEs with a professional framework for fostering continuous improvement and meaningful engagement.
Appraisal Policy
Appraisal Documentation
Appraiser’s Checklist
Appraisee Preparation
Absence Management
Most organisations recognise the significant costs associated with high levels of employee absence. These policy templates are designed to help your business manage both short and long-term sickness absence in a legal, supportive and effective way.
Sickness Absence Policy
Alternative Policy (With Triggers)
Capability
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 Capability Procedure template allows you to work through a comprehensive procedure to address these performanxce issues.
Discipline
Maintaining a fair and consistent approach to conduct is more critical than ever following the implementation of the Employment Rights Act 2025. Our Disciplinary Policy and Procedure Templates have been updated to protect your business in a landscape of heightened accountability and state-led enforcement. With the qualifying period for unfair dismissal reducing to six months and the removal of the compensation cap, the ‘margin for error’ for SMEs has effectively disappeared. These templates provide a step-by-step, ACAS-compliant framework—covering everything from suspension and initial investigations to formal hearings and appeals—ensuring that every decision is backed by robust documentation.
Key Compliance Risks: Capability vs. Conduct vs. Health
A common pitfall for small businesses is using the wrong procedure for the wrong issue. If your policy treats a health problem as a performance issue, you risk an expensive discrimination claim, so make sure you use the right approach and policy framework.
| Issue Category | Legal Definition | Correct Procedure to Apply |
| Capability (Poor Performance) | The employee is trying their best but lacks the skills, aptitude, or training to meet the standard. | Capability Procedure (Focus on training and support) |
| Conduct (Misbehaviour) | The employee has the ability to do the work but deliberately chooses not to, or breaks company rules. | Disciplinary Procedure (Focus on behavior correction and warnings) |
| Absence through Ill Health (Incapacity) | Performance is suffering because of a long-term physical or mental health condition. | Absence Management / Occupational Health (Must consider reasonable adjustments under the Equality Act – focus on support for return to work) |