Capability Procedure

First published on Thursday, Feb 10, 2022

Last updated on Wednesday, Jun 26, 2024

As an employer, dealing with poor performers can be difficult. So if this is the case in your business, you need to know how to manage it correctly.

It's important you follow a fair process for the employee to reach the required standard. Failure to do so can lead to claims being raised against you in the future. In this guide, we'll discuss what a capability procedure is, how it can improve performance, and how to avoid claims being made.

What Does Capability Mean?

According to the Employment Rights Act 1996, capability relates to an ability to do their job. This is assessed by their aptitude, health or any other mental or physical quality required to work in their role.

It's important you understand the difference between both capability and disciplinary.

What is the Difference Between Capability and Disciplinary?

The main difference between capability and disciplinary is disciplinary involves the employees' attitude. You may choose to discipline someone because they're showing a disregard for their work.

However, capability is when the employee is unable to perform to the required standard because of their skill set or suffering from long-term illness or injury.

Is Capability the Same as Conduct?

No, capability references an employee lacking the required skills to do the job. Whereas conduct regards an employee's behaviour. For example, conduct could be:

  • Not listening to instructions.
  • Refusing to carry out work. To investigate an employee conduct issue, you should follow your disciplinary process.

Examples of Capability Issues

There are two main types of capability issues that may arise in your business. So to manage them correctly, you must become familiar with each type.

Poor Performance

The employee may be unable to understand and master the skills required to perform the role they've been hired for. This most likely has nothing to do with their attitude or desire to succeed. Instead they simply can't meet the requirements for their role. This is often a difficult situation for employers as there may already be a strong working relationship in place.

Ill Health

A capability issue could also arise from an employee's medical incapacity. For example, an employee could be on long-term sick leave with no reasonable chance of them returning to work in their former role.

However, you need to be careful if this is down to a disability. A physical or mental impairment may lead to a long-term effect on the employee's ability to perform. Remember, you have a duty to make reasonable adjustments for your disabled employees. These can include making changes to their workstations or altering working hours.

How to Monitor an Employee's Capability

There are many ways in which you can monitor an employee's performance. So, it's important you make it clear to any new starters what standards are expected of them. These standards must be communicated to everyone at the start of employment and monitored regularly.

Common examples of monitoring performance include:

  • Holding regular one-to-one's.
  • Holding annual performance appraisals.
  • Getting feedback from their line manager.

It's important to make the employee aware of the expected standards during your meetings. Encourage them to communicate any issues they have or can foresee happening

What is a Capability Procedure?

A capability procedure in employment law is used as an effective method to manage employee performance. However, you can also undertake an ill health capability procedure.

Be aware that if you're investigating an employee's ill health capability, you must stick with the General Data Protection Regulations (GDPR) and Access to Medical Reports Act. This includes when accessing any medical records.

Why is the Capability Procedure Important?

Capability procedures are important for employers to review an employee's performance and if they're the right match for the company. It allows employers to deal with any performance-related concerns before they become a bigger issue in the future.

They allow you to work with the employee to find ways to improve their performance to an acceptable standard. Fixing an employee's performance can lead to benefits, such as saving on recruitment costs and keeping a consistent workforce.

However, it's important you don't use the procedure to create any unwarranted pressure or stress.

What are the Steps for a Formal Capability Procedure?

It's important you follow the correct capability process when investigating an employee's performance. Failure to do so can lead to claims being raised against you in the future.

So, let's discuss it in more detail:

Try to Resolve Issues Informally

The best way to try and solve any capability issues is to and follow an informal process. Speak to the employee in question, giving them the opportunity to comment on performance concerns and identify areas of improvement. There may be underlying factors which are causing the dip in performance.

It's vital you make the employee aware of the ongoing performance issues. Remember, they can't improve their performance if they aren't aware.

Resolving the issue this way can strengthen the working relationship and encourage the employee to open up about any issues they're facing.

If there is no improvement after the informal capability review procedure has been completed, you should start the formal capability procedure.

Conduct an Investigation

The first stage of the formal procedure is to conduct an investigation into the capability issue and find out why the employee is underperforming.

This investigation is a fact-finding exercise where evidence is gathered on the employee's performance. This can include poorly executed work, customer complaints, past appraisals, and reviewing the employee's personal file.

For an ill-health capability procedure, you may need to ask the employee to source a medical opinion. However, this request can be refused. The first step of this process would be to hold a welfare meeting with them.

Invite the Employee to a Capability Meeting

If you decide that after the investigation a capability meeting is needed, you must invite the employee in writing. This is called a capability procedure template letter (also known as an invite). The following should be clearly explained and included:

  • Your concerns regarding the employee's performance.
  • The reasons for those concerns.
  • The possible outcomes if their performance doesn't improve.
  • The details of the meeting. Including the time, date and location.
  • Who will be present at the meeting.

That the employee is entitled to be accompanied to the meeting by a colleague or trade union representative.

Hold a Capability Meeting

The next stage of the process is to hold a formal meeting to discuss the capability issue. A fair process must be followed at all times, the following steps will ensure this:

  • Make the employee aware of the standards and why you feel they haven't been met.
  • Try and establish any reasons behind the poor performance.
  • Identify what you can do to help improve their performance moving forwards.
  • Work with the employee to agree on new targets for improvement.
  • Following the meeting, write to the employee confirming what was discussed at the meeting and inform them of the outcome.

Decide on the Outcome

Following the capability meeting, you must decide on which outcome you're going to hand to your employee. For example, you may feel a formal warning is appropriate action.

The warnings given in a capability procedure are similar to those given within an employer's disciplinary procedure.

Conduct Further Performance Reviews

The next step of the procedure is to conduct further performance reviews if required. However, you must set clear and manageable objectives that can be achieved within a reasonable timeframe.

Known as performance improvement, this should last for as long as you deem necessary. This may help the employee reach the expected standards that you've set. You can also provide additional training to the employee to help them achieve the goals you've set.

Explain Further Sanctions if Performance Doesn't Improve

You should make the employee aware that if their poor performance continues, then further disciplinary action may be required. This may include a final written warning, or even termination.

This method can be used to ensure performance improves with the warning of further action. However you mustn't be too firm with your employees, as the extra pressure may have a negative effect.

How to Conduct an Ill Health Capability Procedure

When conducting an ill health capability procedure, you should follow the below steps:

  • Hold a welfare meeting to discuss why the employee has been off work for an extended period of time or for persistent absences.
  • Obtain a medical or occupational health report and hold a medical capability meeting.
  • Invite the employee to a capability meeting to discuss their absences, any data you have available and, ask them for comment. Every step should be taken to help ensure the employee can continue working.
  • Remember to take into account any fit notes they've been given. As well as professional medical information. Discuss any reasonable adjustment that may be required for them to carry on working for you.

You must act with caution when undertaking a capability process for ill health.

Illness is a highly personal problem that the employee may not feel overly comfortable talking about.

Can You Dismiss an Employee for Capability?

Yes, you can dismiss an employee on the grounds of capability at the end of their performance improvement plan. However, you must follow the correct procedure in doing so. For employees with over two years’ service, this needs to build through a series of warnings – you shouldn’t jump straight into dismissal.

They must have been given reasonable time, sufficient detail and manageable goals in order to improve their performance.

Are There Any Alternatives to Dismissal?

You should always look for alternatives to dismissal, t may be unreasonable if you don't. This is highly dependent on the administrative resources and size of the company.

You may choose to offer alternative employment or demotion.

Can an Employee Appeal Your Decision?

Yes under the ACAS Code of Practice, the employee should be given the opportunity to appeal against any action taken. This includes capability warnings and their subsequent dismissal.

You should make the employee aware of their right to appeal when you inform them of your decision. Their appeal should be made in writing within the timeframes set out.

People having a casual meeting

How to Avoid Employment Tribunal Claims

You must always follow a fair procedure when following the capability process. Not doing so can lead to claims of unfair dismissal being raised against you. You must be able to prove the decision to dismiss for capability reasons was fair taken after a fair procedure was followed.

It's vital you avoid disability discrimination when dealing with capability due to medical grounds. Treating an employee less favourably due to the fact they're disabled could lead to further claims being raised.

There are some basic issues that you must ensure you're sticking to. So, let's discuss them in more detail:

Standards

You must set both an acceptable and achievable standard. Setting too high standards for your employees could have an adverse effect on their performance.

Consistency

You must be consistent with all your employees when managing or monitoring performance. Especially with employees who carry out similar duties within their role. Failure to do so may lead to claims of discrimination being raised against you.

Expectations

You must give your employees both time and opportunity to adapt to any new expectations you're putting on them. This can include any new training. Never set expectations that are too difficult to achieve, as this could lead to unwanted stress.

Get Expert Advice on Capability Procedures with BrightHR

As an employer, employee performance is vital to the success of your company. So, it's important to know how to manage the situation if it dips below the expected standard.

It's important you follow a fair process in order for the employee to reach the levels you expect. Failure to do so can lead to claims of unfair dismissal being made against you.

If you need any advice when employees resign, we are on hand to help. Our BrightAdvice helpline. Give our friendly and helpful team a call on 0800 783 2806.


Lucy Cobb

Employment Law Specialist

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