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Terminations: Dealing with performance, redundancy and bad fits

12 April 2012

Terminations: Dealing with performance, redundancy and bad fits

Joydeep Hor, Managing Principal and Dimi Baramili, Graduate Associate

While a termination of employment is rarely an enjoyable experience for those involved, for under-performing employees or those who are a poor cultural fit, it may be the best option. In managing such situations, human resources managers must ensure an appropriate balance is struck between achieving the right outcome, and by utilising a process which manages legal risk and commercial outcomes.

This is best achieved by taking a holistic approach to termination and performance management which contemplates the psychological factors at play. As there is often a disconnect between the reason for termination which is due to no fault of the employee, and their subsequent treatment, HR managers must avoid simply following a “tick the box” approach. For instance, although it may be appropriate in some situations (such as misconduct) to arrange immediate exit and suspension of IT systems, it will not be for other forms of termination. Poor treatment may feed into an employee’s resentment, invariably dictating how far that individual will pursue a legal challenge to their dismissal.

The types of separation

Separation of employment comprises different categories with some forms proving more difficult to manage. “Neat” separation situations encompass recognised categories such as redundancy. Other situations may be less clear-cut, such as where an employee is performing at a minimum level, yet management has formed the view they are not an appropriate cultural fit. Management often seeks to address this by offering a large redundancy package. However, if an employer takes an “outside the square” approach by asking the employee what they want, this facilitates a sense of ownership over the process through collaborative discussion. This is more likely to provide a fair result which avoids exposing an employer to consequences and risks such as those below.

Unfair Dismissal

Employers generally seek to avoid reinstatement by relying on the existence of continued conflict between the parties to thwart a reinstatement order. However, Fair  Work Australia often does not accept this, as it sees organisational processes as creating this conflict. Employees also capitalise on an unwillingness to reinstate, and will push for this remedy as leverage to extract a higher payout figure.


Redundancy creates the most concern for HR professionals in the termination context. It properly arises where the employer no longer requires a position to be performed by anyone. Redundancy cannot be used to remove a particular person from a role, as redundancy is focused on the role that is substantively performed and not the person. Before offering a redundancy, extensive obligations for redeployment apply, and it is not sufficient simply to indicate to the employee that no suitable roles have been identified. Instead, by targeting psychological factors, employers can promote ownership by engaging in discussion with the employee about any preferred roles.

Are written policies useful?

Policies can be useful in providing assurances that due process will be followed in a termination scenario, as well as by providing managers with a “toolkit” to approach issues consistently. Policies can also provide ground for claims post-termination if it can be argued that they were not followed. Accordingly, a policy should provide enough latitude to tailor actions to individual circumstances. Where possible, policies should not be incorporated into the terms of the employment contract, as a breach of policy could expose an employer to a claim for breach of contract.

“Walking the talk” in performance management

Managers are occasionally promoted based upon their technical or functional skills and not managerial performance and can sometimes lack appropriate performance management skills. HR must provide training to make managers comfortable with the psychology of performance management, as they often hesitate due to fear of discrimination or bullying claims. To avoid this, limit feedback to duties, tasks and competence.

Taking a holistic approach by addressing underlying psychological factors will help minimise the risks of termination.

General Protections

General protections claims were introduced by the Fair Work Act 2009 (Cth), and allow employees to bring a claim against their employer for taking steps that result in a detriment or hardship (“adverse action”) to the employee in circumstances where, amongst other things, that employee has sought to exercise a “workplace right”. These claims are easy to initiate as the employee has 60 days to bring a claim post-termination, with no remuneration threshold applying to claimants. Consider the situation of an employee receiving robust performance management, and reporting possible bullying to a HR manager, with the employee later dismissed due to poor performance. This employee may seek to raise a claim by arguing that they were dismissed based upon their assertion of a workplace right to a safe work environment free from bullying.

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