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Capability & Performance Policy UK: Employer Guide

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Part ofUK Employment Law Guide for Employers (2025)

Written by Brad Askew Solicitor (non-practising)
Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice.
Updated June 2026 · England & Wales
Underperformance is one of the trickiest things to manage at work. Push too hard and you risk unfair dismissal or discrimination claims. Do nothing and the rest of the team notices, productivity drops, and the problem spreads. A well written capability and performance policy gives managers a clear, fair path to follow when someone isn't meeting the standard expected of them. I'm Brad Askew, Legal Tech Founder at LegalDocuments.co.uk, and in this guide I'll walk you through what a capability policy is for, how it differs from a disciplinary process, what the Acas Code expects, and how disability and reasonable adjustments fit in. Whether you run a small team or a large HR function, understanding this framework helps you act early, document properly, and reduce the chance of a tribunal claim further down the line.

What this document is

A capability and performance policy is the internal document that sets out how an employer deals with an employee who isn't performing at the required level. It covers poor work quality, missed targets, lack of skill for the role, and sometimes long term ill health.

It is distinct from a disciplinary policy, which typically addresses conduct issues like lateness, dishonesty, or breaches of workplace rules. Capability is about ability, not attitude. In practice, most UK employers build their policy around the Acas Code of Practice on Disciplinary and Grievance Procedures.

The Code is not law in itself, but employment tribunals take it into account, and unreasonable failure to follow it can lead to compensation being adjusted by up to 25 percent. A solid policy normally sets out who is responsible for what, how performance is assessed, how formal warnings are issued, what support and review periods look like, and how an employee can appeal a decision. Done well, it protects the business and gives the employee a fair chance to improve.

How to use this document

  1. Start with an informal conversation. Before launching any formal process, sit down with the employee and raise your concerns openly. Explain what the issue is, listen to their side, and agree practical steps for improvement. Many performance problems are resolved at this stage and never need to go further.
  2. Move to a formal capability meeting if things don't improve. Invite the employee in writing, give them the right to be accompanied, and set out clearly what the concerns are. At the meeting, discuss the gap between expected and actual performance, explore any underlying causes such as training gaps or health issues, and agree measurable objectives.
  3. Issue a first written warning and set a review period. If performance hasn't improved, confirm the outcome in writing, specify the standards the employee must reach, and set a realistic review timeframe. Offer support such as training, mentoring, or reasonable adjustments where a disability may be a factor.
  4. Hold a further review and, if necessary, a final written warning. If the required improvement still isn't there, hold another formal meeting and consider a final written warning. The employee must know that dismissal is a possible outcome if performance doesn't improve within the next review period.
  5. Make a dismissal decision only after following the full process. If, after genuine support and review, performance remains below standard, dismissal on capability grounds may be fair. Always give the employee the right to appeal, and keep thorough records of every meeting, warning, and piece of evidence.

Common questions

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Common questions

Q What is the difference between a capability issue and a disciplinary issue?
Capability concerns an employee's ability or aptitude to do the job, such as producing work of poor quality or struggling to meet targets despite effort. Disciplinary issues involve conduct, such as dishonesty, repeated lateness, or breaking workplace rules. The two often overlap and can be confused, but handling them under the correct procedure matters because the fair process and potential outcomes differ.
Q How many warnings should I give before dismissing someone for poor performance?
The Acas Code generally expects at least two warnings before dismissal in capability cases, typically a first written warning followed by a final written warning, unless the shortfall is very serious. Each warning should be paired with a genuine review period, clear improvement targets, and support. Rushing through stages is one of the most common reasons capability dismissals are found unfair at tribunal.
Q What if poor performance is linked to a disability?
If an employee's performance is connected to a disability as defined by the Equality Act 2010, the employer has a duty to make reasonable adjustments. That might mean changing the role, equipment, hours, or targets. Treating a disabled employee unfavourably because of something arising from their disability, without objective justification, can amount to discrimination. Take advice early where a disability is, or may be, in the picture.
Q Can I dismiss someone still on probation for poor performance?
Probation periods give employers more flexibility, but they don't remove all legal risk. Employees with under two years' service generally can't bring an ordinary unfair dismissal claim, but they can still bring discrimination, whistleblowing, or automatic unfair dismissal claims regardless of length of service. Even during probation, a short, fair process with clear feedback is sensible and reduces legal exposure.
Q Does the employee have the right to be accompanied at capability meetings?
Yes, at formal capability meetings that could result in a warning or dismissal, employees have a statutory right to be accompanied by a colleague or trade union representative. You should confirm this right in the invitation letter. Failing to offer it is a procedural flaw that can make a later dismissal unfair, even if the underlying performance concerns were genuine.
Q How long should a performance improvement period last?
There is no fixed legal timeframe. The review period should be long enough to give a realistic chance of meeting the objectives set, usually somewhere between four weeks and three months depending on the role and the nature of the concerns. A senior role with complex deliverables may need longer than a junior operational one. Document why you chose the period you did.
Q Do small employers need a written capability policy?
There is no legal requirement for a standalone written capability policy, but employers of any size are expected to follow a fair process in line with the Acas Code. Having a written policy makes it much easier to show consistency and fairness if a decision is ever challenged. Even very small businesses benefit from setting out, in writing, how they handle underperformance.
If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £89.

Sources

This guide is based on primary UK law and official guidance.

Brad Askew, Solicitor (non-practising)

Written & reviewed by

Brad Askew Solicitor (non-practising)

Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice. LegalDocuments.co.uk is not a law firm and does not provide regulated legal advice.

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Legal disclaimer
This article is for general information only. It is a tool to help you find your way — not legal advice, and not a substitute for speaking to a qualified adviser about your situation.