In the current market, with profits declining for many businesses we are forced to cut costs. One of the largest overheads for any businesses is often the cost of your staff. Where we may have been able to carry mediocre performers in a boom market, we certainly do not have the luxury of settling for second best in the midst of a recession.
Many of us are letting go of under performers in order to cut costs and protect the job security of our high performers. A poor performer can really do some damage to your business and bring down team morale. So poor performance has to be managed quickly and decisively by business owners.
In July of this year as part of the Rudd reforms to the Industrial Relations System in Australia, small businesses will be subject to the new ‘Small Business Dismissal Code’. This code will impose a step by step process on how small businesses with less than 15 staff go about dismissing staff. There will be strict procedures you must follow to ensure legal compliance.
The new process will involve a 3 step warning process and will include the following stages:
Step one: Issue the employee with a verbal warning. Tell them what behaviour or performance needs to improve, discuss how and by when.
Step two: Issue a first written warning, stating specifically your areas of concern and agree on an action plan and time frame for the employee to improve their performance.
Step three: Depending on the severity of the issue, you would issue a second and final warning on the same performance related issues and again agree upon strategies for improvement and this time you would explain the consequences of non improvement may include you having to let them go if their performance does not meet minimum standards.
Step four: Termination of employment is risky business. Make sure you get HR advice before making the decision to terminate. All terminations must be in writing and in most cases an employee is entitled to a notice period and other entitlements upon termination of their employment.
It is important at every stage of the process that you give the employee an ‘opportunity to respond’ and reasonable time frames to improve performance, making emotional and rash decisions could see you land yourself in hot water or with an unfair dismissal on your hands.
Prior to 1 July 2009, when Fair Work Australia kicks in, it is a lot easier for businesses with under 100 employees to terminate employees for valid reasons such as unacceptable job performance without having to provide the employee with three warnings. So if you were planning on having that difficult conversation with that mediocre employee, sooner is better than later.
What do you think of the new 3 step warning process soon to be imposed on business ?
