How to manage underperformance without ending up at Fair Work
Underperformance is the problem most managers avoid — and avoidance is exactly what turns it into an unfair dismissal claim. Here’s a fair, defensible way to handle it.
Updated June 2026 · 8 min read
Almost every manager has one: the employee who isn’t meeting the mark, and the conversation that keeps getting put off. The instinct to avoid it is human. It’s also the single biggest reason performance issues escalate into formal disputes and claims.
Handled early and fairly, most underperformance is resolved long before it becomes a legal problem. The key is following a process that is genuinely fair to the employee — which, not coincidentally, is also what makes any eventual decision defensible.
First: is it performance or conduct?
These two get confused, and they’re handled differently. Underperformance is when someone can’t or doesn’t meet the required standard — missed targets, quality issues, capability gaps. Misconduct is a behavioural breach — dishonesty, safety violations, harassment. This guide is about performance; serious misconduct follows a separate disciplinary path.
A fair process, step by step
1. Be clear on the expectation
You can’t fairly hold someone to a standard they were never clearly set. Before any conversation, get specific about what "good" looks like for the role — and confirm the employee understood it. Vague expectations are where most performance cases fall apart.
2. Have the conversation early
Raise the issue while it’s small, privately and directly. Describe the gap between expectation and reality with specific examples, listen to the employee’s perspective — there may be a cause you don’t know about — and agree on what needs to change.
3. Put a fair improvement plan in place
If an informal conversation isn’t enough, move to a structured Performance Improvement Plan (PIP): clear objectives, the support you’ll provide, a reasonable timeframe, and what happens if things don’t improve. A PIP is not a paperwork exercise to justify a dismissal — done properly, it gives the person a real chance to succeed.
4. Document everything
Keep a clear, factual record of every conversation, plan and review. Not to build a case against the employee, but because a fair process you can’t evidence is, in practice, no protection at all.
5. If it still doesn’t improve
Where performance doesn’t lift despite a fair process, dismissal may be the outcome. This is the highest-risk moment — procedural fairness is everything. The employee should understand their performance is at risk of ending their employment, have a chance to respond, and be allowed a support person in formal meetings.
Fair Work looks closely at process: was there a valid reason, was the employee told about it, were they given a chance to respond, and were they warned? Get the process right and a fair decision will usually hold. Skip a step and even a justified dismissal can become a costly claim.
The bottom line
Underperformance rarely becomes a legal problem because the employer made the wrong final call. It becomes one because the process leading up to it was rushed, undocumented, or skipped entirely. Slow down, be fair, write it down — and get senior advice before you act on anything that could end someone’s employment.
- ✓Distinguish performance (can’t/doesn’t meet standard) from conduct (behavioural breach) — they’re handled differently.
- ✓Avoidance is what turns a small issue into a claim; raise it early and privately.
- ✓A fair improvement plan gives a real chance to succeed — it’s not just cover for a dismissal.
- ✓Procedural fairness — valid reason, notice, a chance to respond, warnings — is what makes a decision hold.
Book a free 30-minute Risk Review, or take the 2-minute Workforce Scorecard to see where you stand.
This guide is general information for Australian employers, not legal advice. For advice on your specific situation, book a Risk Review or speak to a qualified adviser.