When Can a Dismissal Be Justified on Performance Grounds?

Dismissal on performance grounds is a form of capability dismissal under UK employment law. It is potentially fair under the Employment Rights Act 1996, but only where the employer can demonstrate both a valid reason and a fair process.

Employment Tribunals do not decide whether an employee was “good enough” in absolute terms. Instead, they assess whether the employer acted reasonably in treating performance as a sufficient reason for dismissal and whether a fair procedure was followed.

Legal Basis for Performance-Based Dismissal

Under section 98 of the Employment Rights Act 1996, capability is a potentially fair reason for dismissal. Capability includes an employee's:

• Skill and competence
• Ability to meet required standards
• Performance output and quality
• Aptitude or qualifications relevant to the role
• In some cases, health affecting performance

Performance dismissal is therefore lawful in principle where the employee cannot meet required job standards despite appropriate support.

When Performance Justifies Dismissal

A dismissal may be justified on performance grounds where the employer can show all or most of the following:

1. Clear Performance Standards Were Set

The employer must be able to show that:

• Job expectations were clearly communicated
• Performance standards were reasonable and realistic
• The employee understood what was required

Without clear standards, it is difficult to show underperformance objectively.

2. Evidence of Underperformance Exists

Tribunals expect employers to rely on documented evidence such as:

• Appraisal records
• Performance reviews
• Missed targets or KPIs
• Customer complaints or quality metrics
• Written feedback over time

Isolated incidents are usually insufficient unless they are serious and persistent.

3. The Employee Was Given Support and Opportunity to Improve

Dismissal is normally only justified after attempts to improve performance. This typically includes:

• Informal feedback and coaching
• Training or refresher support
• Reasonable adjustments to workload or duties where appropriate
• A structured performance improvement process

Case law and tribunal guidance consistently emphasise that dismissal should be a last resort where improvement has not occurred.

4. A Formal Performance Improvement Process Was Followed

A fair process usually involves:

• A formal performance improvement plan (PIP) or capability procedure
• Clear targets and timeframes for improvement
• Regular review meetings
• Documentation of progress or continued failure

Employers are expected to follow the ACAS Code of Practice as a benchmark for fairness.

5. Warnings Were Issued Before Dismissal

In most cases, fairness requires staged warnings:

• Informal warning or initial discussion
• First written warning
• Final written warning
• Dismissal if no improvement

Immediate dismissal for poor performance is uncommon unless the performance issue is extreme and cannot realistically improve.

6. A Reasonable Time to Improve Was Given

Tribunals assess whether the employee had a fair opportunity to improve. Relevant factors include:

• Complexity of the role
• Length of the improvement period
• Whether targets were achievable
• Whether expectations were adjusted appropriately

A very short or unrealistic improvement period can make dismissal unfair.

7. Consideration of Alternatives Before Dismissal

Before dismissing, employers are expected to consider:

• Redeployment to a more suitable role
• Adjusting duties or workload
• Additional training or mentoring
• Temporary support measures

Failure to consider alternatives can undermine fairness, particularly in larger organisations.

8. The Decision Falls Within the “Range of Reasonable Responses”

Employment Tribunals apply the “range of reasonable responses” test. The question is not whether the tribunal would have dismissed the employee, but whether a reasonable employer could have done so in the same circumstances.

Relevant case law establishes that tribunals must not substitute their own view for that of the employer, provided the employer acted reasonably and followed a fair process.

Common Situations Where Performance Dismissals Are Found Fair

Performance-based dismissal is more likely to be upheld where:

• There is a long-term, documented failure to meet targets
• Multiple warnings have been issued with no improvement
• The employer provided training and structured support
• The employee was given time and clear expectations
• The role requires minimum competence standards (e.g. safety-critical or client-facing roles)

Common Situations Where Performance Dismissals Are Unfair

A dismissal is often found unfair where:

• No clear performance standards were communicated
• There is no formal improvement process
• The employee was dismissed after isolated performance issues
• There was no warning or opportunity to improve
• Targets were changed unfairly or applied inconsistently
• Personal bias or discrimination influenced the decision
• No evidence supports the alleged underperformance

Procedural failings alone can be sufficient for a finding of unfair dismissal, even if some performance issues existed.

Interaction With Capability and Ill Health

Performance-related dismissal can overlap with ill health. In such cases, employers must also consider:

• Occupational health assessments
• Whether the condition amounts to a disability under the Equality Act 2010
• Reasonable adjustments
• Suitable alternative roles

Failure to address health-related factors can make dismissal both unfair and potentially discriminatory.

Tribunal Process in Performance Dismissal Claims

If a claim is brought, an Employment Tribunal will typically assess:

1. Whether capability was the genuine reason for dismissal
2. Whether a reasonable investigation into performance was carried out
3. Whether warnings and support were provided
4. Whether the decision to dismiss was reasonable

The burden is on the employer to justify both the reason and the process.

Time Limits for Bringing a Claim

An unfair dismissal claim must normally be brought within:

• Three months less one day from the date of dismissal

Before issuing proceedings, the employee must go through ACAS Early Conciliation, which can pause limitation periods.

Remedies for Unfair Performance Dismissal

If the tribunal finds unfair dismissal, possible outcomes include:

• Basic award (based on age, length of service, and pay)
• Compensatory award for financial losses
• Reinstatement in rare cases
• Re-engagement in a similar role

Compensation is assessed based on actual loss and the likelihood of continued employment.

Key Takeaways

A dismissal can be justified on performance grounds where there is clear evidence of underperformance, fair and communicated standards, structured support, and a reasonable opportunity to improve. Employers must follow a fair procedure, typically including warnings, performance management processes, and consideration of alternatives.

Even where performance issues exist, dismissal will be unfair if the process is flawed, unsupported by evidence, or carried out without giving the employee a genuine chance to improve.