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How Labour’s plans for unfair dismissal will impact performance management
Written by Alice Brackenridge on 9 December 2024
The Labour government’s anticipated changes to employment law are potentially poised to significantly alter how organisations manage performance issues.
With proposals to extend employee rights from the very first day of employment, businesses will likely need to rethink their approaches – reinforcing onboarding strategies, setting clear feedback processes, and meticulously documenting all performance-related interactions.
Labour's plan to extend fair dismissal rights
Under current UK law, employees gain the right to claim unfair dismissal after 103 weeks’ service – one week before the two-year mark. If an employee has less than two years’ service, employers generally have greater flexibility when it comes to performance management processes and dismissals, subject to any potential risks such as claims for discrimination or breaches of policies, particularly if there are contractual terms that must be adhered to.
However, Labour’s plan to make unfair dismissal protections a day-one right marks a substantial shift in employment rights. Although these changes are not expected to become law until at least Autumn 2026, they promise to influence how short-service dismissals are handled, so employers may wish to consider making changes now.
Under Labour’s proposals, employers should retain the ability to dismiss employees during what is now termed the ‘Initial Period of Employment’ (IPE), previously referred to as the probationary period. The IPE is expected to last approximately nine months, although the government is yet to confirm this.
During the IPE, employers should still be able to dismiss an employee for issues related to conduct or capability/performance, and the fairness requirements have been designed to be less stringent than beyond this period. Nonetheless, employers will still be required to uphold transparent and equitable processes.
While we don’t yet know for sure what the Bill will say, there is likely to be an increased risk of Employment Tribunal claims. Therefore, as part of the dismissal process within the IPE, Labour suggests that at least one meeting should be held to discuss the concerns with the employee, and that the employee should have the right to be accompanied, as a minimum procedural standard, before dismissal.
The IPE also offers a designated timeframe in which employees must be made aware that their performance and conduct are under scrutiny, emphasising the need for employers to make productive use of this period moving forward.
Free resources: New Labour Government Hub
From guides to webinars, our employer hub contains all the information you need to prepare for and adapt to impending employment law changes, ensuring your organisation remains compliant in the months and years ahead.
What is 'performance', and what is it not?
Performance issues occur when an individual makes genuine attempts to complete their assigned tasks but is unsuccessful, likely due to insufficient skills or knowledge.
This is distinct from conduct issues, where an individual, despite having the necessary skills or knowledge, opts not to perform the tasks, often due to a lack of motivation or willingness.
While conduct issues may impact performance, they must be treated in a different way, i.e. through the disciplinary procedure rather than the performance management route.
Employers can think of this distinction as someone who “can’t cook” (a performance issue) versus someone who “won’t cook” (a conduct issue).
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The need for thorough performance investigations
When dealing with performance concerns, it is necessary to properly investigate what the issues are and to see whether there may be any underlying issue that may be impacting performance, such as a disability, neurodiversity, learning difficulties, and even pregnancy, some of which may be more obvious than others.
Ensuring a fair, non-discriminatory environment, and considering reasonable adjustments where necessary, highlights the employer’s commitment to legal compliance and equitable treatment. It will also enable employers to demonstrate that they did not put the employee at a detriment because of a protected characteristic but rather made adjustments as necessary to level the playing field.
Building a robust performance management framework
In anticipation of Labour’s proposed changes, reinforcing a solid performance management process is essential. Consider the following strategies:
Clear job descriptions
Start by defining explicit roles and responsibilities, ensuring employees understand what’s expected of them from the start. A thorough induction process can help reinforce these expectations and provide employees with the necessary context for their role.
Regular performance reviews
Schedule frequent reviews and one-on-one discussions to monitor progress, address challenges, and set goals. The frequency of these reviews will depend on factors such as the nature of the business, the role, and the employee’s level of seniority. Clearly communicate the review schedule from the outset (e.g. monthly, quarterly) and ensure that these timeframes are consistently adhered to. This helps set expectations and ensures ongoing feedback.
SMART objectives
Ensure goals are Specific, Measurable, Achievable, Relevant, and Time-bound.
Training and support
Offer tailored training and support to help employees achieve their objectives.
Performance monitoring
Objectively track and document performance to identify areas needing improvement.
Feedback and communication
Maintain open lines of communication, providing constructive feedback regularly.
Development plans
Collaborate with employees on structured improvement plans, establishing clear timelines for expected progress.
Meticulous documentation: A shield against disputes
Comprehensive documentation is critical. Record every performance-related conversation, including employee responses and the reasons for any underperformance identified. This will become invaluable in defending against any claims of unfair dismissal where improvement efforts have been exhausted.
Traditional procedures beyond the IPE
Outside the IPE, employers must follow established procedural fairness standards when managing performance issues. It’s generally safe to dismiss an employee after a full formal performance management procedure has been rigorously followed (including a thorough investigation at each stage, and two separate formal warnings which escalate to dismissal, as a minimum) and there has been no improvement despite reasonable support and opportunities.
Employers are advised to explore all alternatives to dismissal, such as extending a final warning, considering demotion, or transferring the employee to another role within the company. Only after these options have been exhausted, and if there are no viable alternatives, should a dismissal be considered.
Again, each step of this process should be well-documented, as it provides evidence of the employer’s attempts to rectify performance issues and underscores their commitment to fairness and compliance. This structured approach aids in protecting the organisation should any unfair dismissal claims arise, offering a robust defence.
Final thoughts
The changes to unfair dismissal proposed by the Labour government will require employers across all sectors to adopt a more proactive approach to performance management.
Employers may understandably have concerns about the increased potential for claims under this new system. However, it’s important to note that dismissals for poor performance in the early stages of employment will still be possible – and can be a lot swifter than out with this period – provided employers have robust performance management practices in place.
By ensuring clarity in expectations, adhering to fair processes, and maintaining detailed records, employers can continue to address performance issues effectively as the legal landscape evolves.
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