Capability Procedure for HR & Managers

Correctly following a capability procedure can be a practical and legal minefield for HR and managers, not least where poor performance could result in bringing employment to an end. Any hasty decision to dismiss an employee due to performance concerns, or where an employer has failed to offer adequate support, could lead to the loss of a potentially valuable member of staff. It could also expose the business to a costly tribunal claim.

This guide explains the use of capability procedures within the workplace, from what these are and when these should be used, to best practice advice on developing a capcability procedure that is supportive, non-discriminatory and ensures you meet your legal obligations.

 

What do we mean by capability?

In the context of employment law, ‘capability’ refers to an employee’s ability to perform their job role, or to do so to the required standard.

Specifically, an employee’s inability to do their job is one of the five potentially fair reasons for dismissal — provided an employer can show that the decision to dismiss relates to the capability of the employee for performing work of the kind which they were employed to do.

Under the provisions of the Employment Rights Act 1996, ‘capability’ is assessed by reference to an individual’s ‘skill, aptitude, health or any other physical or mental quality’. This essentially means that in circumstances where an employee cannot do their job, either because they don’t have the requisite skillset, or because they’re suffering from an incapacitating illness or injury, an employer may have grounds to fairly dismiss them.

Capability should not be confused with conduct. Conduct refers to situations when an individual will not – as opposed to cannot which is a capability issue – do what is required, triggering a disciplinary procedure. It is for managers to be trained and able to identify the difference between conduct and capability matter so that the correct procedure can be followed.

 

Examples of capability issues

Capability issues can arise for a number of different reasons. For example, an employee may simply be unable to master the skills needed, or otherwise meet the necessary requirements to competently fulfil their role. In these circumstances, an employer would need to instigate a capability procedure and, without sufficient improvement, may be able to fairly dismiss them.

The need for a capability procedure, and even a decision to let an employee go, could also come about because of medical incapacity, such as where an individual is on long-term sick leave with little or no prospect of being able to return to their role in the foreseeable future.

However, where any illness or injury amounts to a disability — because an employee has either a physical or mental impairment that’s having a substantial and long-term adverse effect on their ability to do normal day-to-day activities — the employer will be under a statutory duty to make reasonable adjustments. These adjustments could include changes such as altered hours, amended duties or workplace adaptations; all of which are designed to remove or reduce any disadvantage suffered by a disabled employee in the workplace.

 

What is a capability procedure?

A capability procedure specifies how any issues around an employee’s inability to perform their job role should be managed across an organisation. This is in contrast to misconduct matters, relating to an employee’s behaviour at work, which should be dealt with by way of disciplinary proceedings.

The primary aim of a capability procedure should be to establish and address the reasons for poor performance. In cases where the employee continues to fall short of the required levels of performance, and there’s no likelihood of any further improvement, there should then be a clear procedure for fair dismissal. Even where an employer can establish a potentially fair reason for dismissal — including an employee’s inability to do their job, or to do their job to the required standard — they must still follow a fair procedure at all times.

However, the way in which a capability procedure is handled, and the steps that need to be taken to make this fair, will very much depend on the reason for the poor performance.

A capability procedure for incompetency should, as a minimum, involve:

• Conducting a thorough investigation into the employee’s standard of work, including canvassing the opinions of those responsible for overseeing that work and reviewing any previous performance appraisals and/or one-to-one meetings
• Providing the employee with an opportunity to explain the performance issues in question
• Exploring all possible options with the employee to support them in their job role and get them up to speed, such as supervision, mentoring or training
• Agreeing or setting out measurable targets moving forward, and providing the employee with a reasonable timeframe within which to meet these targets
• Explaining the potential consequences of any failure to make the necessary improvements
• Considering whether there is another vacancy that would better suit the employee’s abilities.

 

A capability procedure for medical incapacity should, as a minimum, involve:

• Conducting a thorough investigation into the medical facts, including assessing any fit notes provided by the employee’s GP and, where necessary, obtaining an up-to-date medical opinion to establish a prognosis and whether any improvement might be expected
• Providing the employee with an opportunity to consider any medical evidence, make representations about this and provide any evidence in rebuttal
• Exploring all reasonable adjustments to support the employee in their job role, such as flexible working arrangements and adapting the workplace to minimise any disadvantage
• Where necessary, obtaining a report from an occupational health specialist to help identify what adjustments can be made specifically in the context of the employee’s job role
• Providing the employee with a reasonable timeframe within which to prove that they can do their job to the required standard once any reasonable adjustments have been implemented
• Where an employee is no longer able to do the work that they were employed to do, looking at any suitable alternative employment within the business.

 

Monitoring capability

Capability at work should be assessed by measuring the employee’s skills, abilities and performance against clear standards and expectations. These expected standards must have been communicated to the employee from the outset of their employment. They must also be reiterated in any subsequent performance appraisals or one-to-ones, where necessary, or as part of any capability procedure. The potential consequences of failing to make any improvement within the prescribed timescales, including dismissal, should also be made clear.

In the context of incompetency issues, having undertaken an initial review and put in place suitable support measures, if sufficient improvement isn’t made on further review, the employee may need to be issued with a written warning. Depending on the inadequacy of their performance, and any adverse impact that this is having on the business. it may be appropriate to go directly to a final warning. However, it’s often best to provide the employee with a series of written warnings before making any decision to dismiss.

In the context of medical incapacity, both practically and legally speaking, the position is generally less straightforward. An employer can lawfully dismiss an employee on the grounds of medical incapacity, but only once they’ve followed a much more complex capability procedure, including obtaining expert evidence and trialling a range of reasonable adjustments.

What is ‘reasonable’ will be determined by all the circumstances. This means that an employer will need to explore all possible options — ideally in consultation with the employee and having regard to any employee requests — making a decision based on whether there are sufficient resources to fund the adjustments, how practical any adjustments are to implement, and whether these adjustments will be effective in overcoming or reducing any disadvantage.

Where adjustments are made, the employee must be given sufficient time to prove their capability to do their job with these adjustments in place. They may also need to be given sufficient time to recover from their illness or injury, and conclude any course of treatment.

In circumstances where there are no reasonable adjustments that can be made to support an employee in their return to work, or in performing their job role to the required standard, it may be lawful to dismiss them — even if they’re disabled. However, if a decision to dismiss is ultimately made, the employer must not only have followed a full and fair capability procedure, but acted reasonably in all the circumstances. This means that a dismissal decision must fall within a range of reasonable responses available to the employer, having regard to things like the anticipated length of the employee’s continuing or recurring absence, any ongoing treatment, the likelihood of any recovery and the level of disruption to the business.

Dismissal on grounds of medical incapacity should only ever be treated as a measure of last resort, and only having secured expert legal advice from an employment law specialist.

 

The importance of managing employee capability 

There are a number of legal risks associated with dismissal due to capability issues, especially for medical incapacity. A decision to dismiss a disabled employee could potentially amount to both unfair dismissal and unlawful disability discrimination. Any failure to implement reasonable adjustments could also, of itself, be classed as a form of unlawful discrimination.

In a standard unfair dismissal claim, an employee would require 2 years’ continuous service. However, where performance issues are referable to a disability, any dismissal could potentially be deemed by a tribunal as automatically unfair, for which an employee would not need to satisfy any qualifying service requirement. Protection against disability discrimination is also a legal right that arises from day one of employment.

However, the purpose of a capability procedure isn’t solely intended to be a box-ticking exercise, to ensure that any dismissal decision is deemed non-discriminatory and fair. This procedure should primarily be used to investigate the reasons behind any capability issues, and identify ways to resolve these. By taking steps to support an employee at work, rather than simply giving them their notice to terminate their employment, will not only minimise the risk of litigation, but increase staff retention rates and reduce the cost of recruitment.

Fairly managing capability issues will also go a long way to improving performance levels and building a positive employer-brand to attract and retain top talent. Even the most highly-qualified and experienced employees may, at some point in their career, suffer with medical incapacity or other capability issues. Having a trusted and reputable employer who is prepared to support them through any difficult period is likely to pay dividends.

 

Best practice advice

Put in place a written capability policy to ensure that employees have a clear framework for required performance standards. The policy should set out what is meant by capability, together with detailed examples, and the procedures that will be followed where capability issues arise. Some employers will use their disciplinary procedure to deal with performance issues, but a separate capability policy and procedure can act as a more useful tool.

Depending on the nature and seriousness of the capability issue in question, an informal approach may be considered first, including the use of an annual appraisal system, regular one-to-one meetings or such other verbal discussions as are deemed necessary. These can be used to identify areas of concern at an early stage; clarify the standards required; establish and address any likely causes of poor performance; identify any training needs or other possible support options; and set expectations for improvement.

Where an informal approach doesn’t work, or the matter is especially serious, a formal capability procedure will need to be instigated. In the first instance, employees should be given clear targets for improvement and set timescales for achievement. Where possible, they should also be issued with a series of written warnings prior to making any decision to dismiss. The duration of a written warning can vary, depending on the issues involved, although the employee must be given a reasonable period to turn things around so as to avoid dismissal. Finally, where dismissal is unavoidable, the employee must be informed of this decision in writing, providing the reasons why, and informed of their right to appeal.

 

Need assistance?

DavidsonMorris are experienced HR and employment law specialists offering guidance and support to employers dealing with capability and performance-related issues. If you have a question about your rights and responsibilities as an employer, or for advice on taking a proactive approach to managing workforce performance, contact us for advice.

 

Capability procedure FAQs

What is the capability procedure?

A capability procedure can be informal or formal, but both will be used to address an employee’s poor performance issues at work, either due to incompetence or ill health.

What is formal capability procedure?

A formal capability procedure is where an employee’s inability to do their job to the required standard is investigated, with targets for improvement and timescales for achievement. This may result in a series of written warnings and even dismissal.

Can I be sacked for capability?

It’s possible to be sacked for being unable to perform your job properly, even if this is on grounds of ill health, although your employer must first explore any support options and reasonable adjustments that can be made to help.

What does a capability meeting mean?

A capability meeting is where issues surrounding an employee’s performance at work are discussed. Typically, this meeting will be used to explain to the employee what standards are expected of them and to put in place an action plan.

What is the difference between capability and disciplinary?

If the issue relates to something the individual can but won't do, it is a conduct issue, while capability relates to something the individual can't do.

Last updated: 28 December 2021