Performance Management of Employees

Australia has strict laws around the performance management of employees. Employers need to be aware of workplace protections and adopt a policy for performance management that is both fair to employees and compliant with Australian law. This article looks at the legal implications of employee performance management in Australia. 

What is performance management?

Performance management is an ongoing process of communicating an employer’s performance expectations and priorities, clarifying an employee’s responsibilities, and negotiating the employee’s career development in line with the organisation’s goals. Most significantly, performance management is used with underperforming employees, either as a mechanism to improve their performance or as part of a termination process.

At its best, performance management is an integral part of employee supervision. It clarifies employment expectations and ensures that the employee is receiving the support they need to achieve the organisation’s goals. At its worst, performance management is a source of conflict, decreased morale, and a rich source of material for discrimination and unfair dismissal claims.

Employment expectations

Critical to the success of performance management is the need for employers to ensure that employees understand the performance expectations. Many employers have written employment standards and position descriptions that set out the responsibilities of employees and their roles within the organisation. Making these standards explicit and freely available is an important first step in ensuring successful performance management.

The employment contract is also often a crucial document in performance management. A well-drafted employment contract sets out the scope of the employee’s role and provides the employer with a contractual standard against which to measure the employee’s performance. Of course, for the employment contract to function in this way, it must remain up-to-date and relevant to the employee’s current role. To maintain the efficacy of the employment contract, when a worker’s role changes, the company should undertake a contract review and negotiate new terms with the employee.

Periodic performance reviews

Typically, part of performance management is periodic performance reviews. During these meetings, employees are assessed and given feedback on their performance. This is also an opportunity for the employee to share their own feelings about their progress with their employers.

Performance management and reviews are private matters. An employer should keep an employee’s progress confidential and implement procedures and processes to protect the employee’s privacy. Protecting employee privacy with mechanisms such as Data Breach Response Plans and Privacy Impact Assessment Plans are important ways to fulfil privacy obligations and build trust with employees.

Managing poor performance

Employers should deal with minor incidents of poor performance, such as missing a single deadline, through informal discussion between the employee and the manager. When a minor issue is persistent, such as the employee being regularly late, the manager should clearly identify the issue, give the employee a chance to respond and establish a plan to assist the employee in achieving better performance. There may be reasons for the poor performance that would come to light during such discussions. For instance, the employee may be unable to access public transport that reliably arrives on time and may benefit from a flexible start time.  

During performance management, employers should also keep in mind the minimum employment benefits created by the National Employment Standards (NES). The NES establishes basic conditions that an employer must provide to employees, on issues such as working hours and leave. During a performance review, an employer must keep these legal protections in mind and ensure that it is not castigating an employee for accessing these protected benefits.

When the performance issue is more serious, the employer should use formal counselling in a face-to-face meeting. The employee should provide written notice beforehand specifying the reason for the meeting, the date and location, and the names and positions of the attendees. It is also important for the employer to allow the employee to bring a support person to the meeting. Providing the employee with a brief meeting agenda in advance allows the employee to prepare, which is likely to lead to more productive discussions.

During the meeting, the employer should outline their concern and allow the employee to respond. The most likely outcome of an initial performance meeting is a formal performance improvement plan, setting goals for the employee with agreed timeframes. If the employee does not comply with this plan, the employer should issue another formal notice of counselling and establish a new performance plan. The employer cannot consider terminating the employee until they have created two performance plans that the employee fails to follow.

Legal framework

Employment law provides a framework for a company to performance manage an employee. The Fair Work Act 2009 and Fair Work Regulations 2009 create legal protections for employees, including protection from dismissals that are harsh, unjust, or unreasonable. Under this law, a dismissal may be found to be:

• unjust because the employee was not guilty of the alleged misconduct;
• unreasonable because the evidence or material before the employer did not support the conclusion;
• harsh on the employee due to the economic and personal consequences resulting from being dismissed, or
• harsh because the outcome is disproportionate to the gravity of the misconduct (the punishment does not fit the crime).

Go To Court Lawyers can advise employers on the best way to legally approach performance management or help an employee who feels they have an adverse action claim. Contact the employment law team on 1300 636 846.