Our recent survey has revealed that almost half of employers (46%) believe financial pressures are one of the main external factors affecting employee underperformance. Homeworking (17%), childcare responsibilities (14%), and time management (13%) were also cited as key factors affecting employee performance. 

The survey also found that mental health and work-related stress were significant internal drivers of underperformance, with almost a third of employers (30%) identifying it as a cause for concern. In addition, ineffective leadership (28%), poor conduct (20%), and lack of formal training (15%) were uncovered as additional factors affecting employee performance. 

“Employers must recognise that financial pressures due to the rising cost of living are now a major factor in employee underperformance,” said Danielle Scott, Employment Law Adviser and Solicitor at WorkNest. “By prioritising open communication and building relationships with their employees, employers can identify and address the real issues that impact their team’s performance, ultimately improving productivity and reducing the risk of grievances and absenteeism.” 

Where challenges exist, employers also expressed concern about their line managers’ ability to handle conversations about underperformance, with 27% reporting they had provided inadequate training. If mishandled, the impact can be significant, with 25% of employers finding that grievances crop up out of the blue or see an increase in sickness absence. 

Danielle added, “With over a quarter of line managers struggling to handle conversations about underperformance, employers must take action by providing them with training and guidance on how to address these situations. Conversations can be awkward if they don’t know how to approach them. By having regular reviews with an employee on performance management, line managers can increase employee engagement and motivation as well as provide clarity on individual and team objectives. Line managers also have an opportunity to identify training gaps and development opportunities through regular conversations for those team members that might require extra support.” 

Research by WorkNest, the employment law, HR consultancy and health and safety support firm, questioned 558 employers on managing performance in February 2023.