How to Manage Underperforming Staff (Without Getting Sued)

One wrong move on a Performance Improvement Plan can cost your business thousands in a constructive dismissal claim. Most employers think they are protected — but standard PIPs fail at tribunal every single day. Here is how to fix your performance management process before a disgruntled employee turns it against you.

The Constructive Dismissal Trap

Constructive dismissal occurs when an employer's conduct amounts to a fundamental breach of the implied term of trust and confidence — and the employee resigns as a result. Courts and tribunals increasingly recognise poorly designed or bad-faith PIPs as one of the primary routes to constructive dismissal liability.

The trap is subtle. An employer believes they are managing a legitimate performance issue. The employee believes they are being systematically set up to fail. When the targets are vague, the workload has increased, the monitoring is disproportionate, and the support is absent — the tribunal often agrees with the employee.

In remote and hybrid workplaces, the risk is amplified. Asynchronous communication makes it easier for management behaviour to go undocumented — and harder for employers to demonstrate that genuine support was offered.

"We thought our PIP was watertight," said one operations director at a mid-sized logistics firm, following a successful constructive dismissal claim against the company. "The tribunal said the targets were set to be failed, not met. It cost us significantly more than the employee's annual salary."

The Legal Framework Every Employer Must Understand

Before any performance management process begins, employers must have a clear, documented baseline. Vague concerns — "attitude issues," "not a team player," "below expectations" — are not sufficient grounds for a PIP and will not survive tribunal scrutiny.

A legally defensible performance management process requires:

Clear, objective baseline metrics established before the PIP begins — documented and signed off

Specific, measurable targets set over a realistic 30 to 90 day window

Written notification to the employee of the concerns, the targets, and the consequences of failing to meet them

Regular, documented check-ins that offer genuine support and coaching — not just surveillance

Adjustment mechanisms where external factors, system failures, or workload changes affect performance

A genuine opportunity for the employee to respond at every stage

Under the ACAS Code of Practice on Disciplinary and Grievance Procedures, performance management that leads to dismissal must follow a fair process. Failure to do so can result in an unfair dismissal finding — and an ACAS uplift of up to 25% on any tribunal award.

The Reasonable Adjustments Obligation

This is where many employers make their most expensive mistake.

Where an underperforming employee has a disability — including a mental health condition such as anxiety, depression, or burnout — the employer has a specific legal duty under the Equality Act 2010 to make reasonable adjustments before any performance management process begins.

Applying a standard PIP to an employee whose performance is affected by a disability, without first considering adjustments, may constitute disability discrimination — an uncapped claim at Employment Tribunal.

Before commencing any PIP, employers should:

Consider whether the performance issues may be connected to a health condition

Request an occupational health assessment where appropriate

Explore reasonable adjustments — amended targets, flexible working, additional support

Document every step of that consideration process

According to the Equality and Human Rights Commission, disability discrimination claims have risen significantly in recent years — and performance management processes are one of the most commonly cited triggers.

Setting Up a Defensible Improvement Framework

A PIP that survives tribunal scrutiny looks very different from one that does not. The key distinction is whether the framework was designed to help the employee succeed — or to build a case against them.

A defensible PIP includes:

Targets that are specific, measurable, achievable, relevant, and time-bound

Resources, training, and support explicitly committed to in writing

Regular progress reviews with written outcomes — not just final assessments

An escalation mechanism where the employee can raise concerns about the process itself

A clear statement that dismissal is a potential outcome if targets are not met — given at the start, not the end

Where targets are set at an unachievable level, where workloads increase simultaneously, or where support is withheld — the PIP will not withstand scrutiny.

Executing Fair Progress Reviews

Weekly or bi-weekly check-ins must be genuine support sessions — not evidence-gathering exercises. The distinction matters at tribunal.

Document every check-in. Record what support was offered, what was discussed, and what adjustments were made. Where external factors or system bottlenecks affect the employee's performance, note them — and adjust the targets accordingly.

Disproportionate monitoring — logging every minute of an employee's working day, scrutinising output in a way that other employees are not subject to — can itself form the basis of a harassment or constructive dismissal claim.

Your Action Plan

Establish clear, objective, documented performance baselines before any PIP begins

Check whether the performance issues may be connected to a health condition — and consider reasonable adjustments first

Design PIP targets that are genuinely achievable — with support, training, and resources committed in writing

Conduct regular check-ins that offer genuine coaching — document every session

Adjust targets where external factors or workload changes affect performance

Never use a PIP as a substitute for a redundancy process — if the role is at risk, follow the correct redundancy procedure

A fair performance management process protects your business. A weaponized one will cost you far more than the performance issue ever did.