Performance management audits reduce legal risks

by 06 May 2009

In the current economic climate, businesses should conduct an audit of their performance management practices, particularly given continuing high numbers of unfair dismissal claims which suggest many employers are still getting it wrong when restructuring and managing workplaces, according to Harmers Workplace Lawyers.

“Employers should take the time now to audit their current performance management processes, identify the weak areas and then make sure the proper procedures are in place to minimise any potential legal issues,” said Lesley Maclou, partner at Harmers.

She warned that mishandling performance management processes can present legal pitfalls for employers, with possible claims including unfair dismissal, breach of contract, discrimination or breach of workplace agreement.

“With more than 6000 unfair dismissal claims brought against employers over the past 12 months, there are clearly too many employers who are not implementing proper performance management practices,” she said.

Maclou referred to the new Fair Work legislation, which will require employers to review all employment practices, including performance management practices, for when the new regime comes into effect – partly on 1 July 2009 and the remainder on 1 January next year.

She said it was a chance to ensure performance management processes are not just adequate for legal risk management, but importantly, that they are also useful tools to help sustain a business through the current difficult economic climate.

Employers should address the way employee contracts and policies are drafted and ensure communications are properly managed, according to Maclou.

“Employers should clarify with each employee their understanding of what constitutes good performance or poor/inadequate performance, and document these expectations, supported by ongoing verbal communication and consultation with employees,” she said.

“Employers need to ensure they keep all communication with their employees as clear as possible. The performance management process should not only be fair but perceived to be fair by employees. Employees need to understand exactly what performance criteria their own performance is being measured against, so transparency is key.”

She also said that now would be a natural time for employers to turn their focus to internal processes such as these.

“In a prosperous economy there is less incentive to direct valuable management time to individual performance issues,” she said.

“However, in the current economic downturn, employers are well advised to pay more attention to performance management to ensure all employees are making a valuable contribution to the business.”

Practical advice for business to improve their performance management practices:

· Identify and understand employee and employer rights and obligations, including Federal and State legislation, common law, awards, agreements, individual contracts, policies and procedures;

· Identify the work standards expected of employees;

· Always recruit with the aim of finding an employee who will be able to meet the expected standards;

· Put in place probationary periods so that an employee’s capacity to meet the standards can be gauged early on;

· Implement a performance assessment process to identify when those standards have not been met;

· Effectively communicate unsatisfactory performance to employees;

· Take steps to address unsatisfactory performance such as arranging proper induction and training, providing counselling, making adjustments to the position, ensuring regular feedback and two-way communication, coaching/mentoring, arranging team meetings, developing a business culture consistent with the expected performance and developing intra-office relationships to bolster performance;

· Where the steps above fail to address the performance problem, engage in a warning process commencing with informal warnings and moving to formal written warnings;

· Do not use ‘standard’ documents – ensure that contracts, policies and performance appraisal forms are relevant and tailored to the circumstances and requirements of business and employee’s positions; and

· If necessary, terminate employment while ensuring sensitive and sensible exit procedures.


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