How to Handle Underperformance at Work | CoachScript

Knowing how to handle underperformance at work is one of the most important skills a retail line manager can develop. Whether a team member is missing sales targets, letting their timekeeping slip, or consistently producing work below the standard expected, addressing it promptly — and fairly — protects your team, your business, and your legal position.

This guide walks you through the ACAS-aligned capability process step by step, from that first awkward conversation to a structured Performance Improvement Plan, so you can manage the situation confidently and without unnecessary risk.

Capability versus conduct: know the difference first

Before you do anything else, you need to identify why the performance is falling short. UK employment law treats two distinct types of performance problem very differently.

• Capability issues arise when an employee is genuinely trying but lacks the skill, aptitude, or knowledge to meet the required standard. This might be a new hire struggling with the EPOS system, a team leader who has been promoted beyond their current skill set, or someone whose health is affecting their output. Capability issues require a supportive, improvement-focused approach.
• Conduct issues arise when an employee is able to perform but is choosing not to — persistent lateness, refusing reasonable instructions, or deliberately ignoring policy. These belong in a disciplinary process, not a capability one.

Mixing up the two is a common mistake that can lead to an unfair dismissal claim. If you are unsure, look at the pattern: is the employee trying and failing, or capable but unwilling?

There is a further complication worth knowing: if the performance issue is linked to a disability or long-term health condition, you have a legal obligation under the Equality Act 2010 to consider reasonable adjustments before initiating any formal process. Always document your thinking on this before moving forward.

Step 1 — Start with an informal conversation

ACAS guidance is clear that the right first step is almost always an informal discussion. Many performance problems stem from a simple mismatch of expectations, a personal difficulty the employee hasn't raised, or a training gap that is straightforward to fix. A short, honest conversation — held in private, kept supportive in tone — can resolve the issue without any formal process at all.

When you have this conversation:

1. Be specific. "Your customer satisfaction scores have dropped from 82% to 64% over the past six weeks" is more useful than "your performance hasn't been great lately."
2. Ask before you tell. Find out whether there is a reason behind the dip — a change in circumstances, a skills gap, or something on the shop floor making the job harder.
3. Agree a clear standard and a timeline. The employee should leave the conversation knowing exactly what is expected and by when.
4. Offer support. Training, buddy shifts, more regular one-to-ones — whatever is appropriate for the gap you've identified.
5. Write it up. Keep a brief, dated note of what was discussed, what was agreed, and any support offered. Store it securely.

Even at this informal stage, good notes are your safety net. If the issue does escalate, a written record shows that you identified the problem early and gave the employee a genuine opportunity to improve.

Step 2 — Move to a formal capability procedure if the problem continues

If performance does not improve following the informal stage, you will need to begin a formal capability procedure. This must follow the ACAS Code of Practice on Disciplinary and Grievance Procedures. Failure to do so leaves your business exposed: an employment tribunal can increase any compensation award by up to 25% if you have unreasonably failed to follow the Code.

The formal process involves three key actions:

1. Investigate and gather evidence. Collect objective, factual evidence of the underperformance — specific examples of missed targets, customer complaints, error logs, or absence records. The evidence needs to demonstrate a clear gap between the standard required and what the employee is delivering.
2. Invite the employee to a formal meeting in writing. The invitation letter must explain the concerns, share the evidence in advance, state that this is a formal capability meeting, and confirm the employee's statutory right to be accompanied by a trade union representative or a fellow worker. Give reasonable notice — usually five working days.
3. Hold the meeting fairly. Listen to the employee's response to the evidence. They may raise mitigating circumstances you were not aware of. Only proceed to the next step once you have genuinely considered everything they say.

If you are looking for a structured way to prepare for the meeting itself, the CoachScript investigation guide can help you gather and organise the evidence before you go in.

Step 3 — Set up a Performance Improvement Plan

A Performance Improvement Plan (PIP) is not a punishment — it is a structured, documented agreement about what improvement is needed, what support will be provided, and how progress will be measured. A well-written PIP protects both the employee and the business.

Every PIP should include:

• SMART objectives — Specific, Measurable, Achievable, Relevant, and Time-bound. Vague targets like "improve your attitude" are unenforceable and will undermine your case if challenged.
• A realistic timeframe — 8 to 12 weeks is typical for most retail roles, though this varies depending on the complexity of the improvement required.
• The support you will provide — training, coaching, buddy shifts, additional one-to-ones, or access to HR resources.
• Scheduled review points — weekly or fortnightly check-ins to track progress, provide feedback, and document how the employee is responding.
• The consequences of non-improvement — the employee must understand that failure to meet the PIP targets could result in a formal warning or, ultimately, dismissal. This is not a threat; it is a legal requirement that the process be transparent.

Once the PIP is agreed, both you and the employee should sign a copy. This is the single most important document in a capability process.

The CoachScript script generator can help you structure difficult PIP conversations so you cover everything you need to without the discussion going off track.

Step 4 — Review, decide, and document

At the end of the PIP period, there are three possible outcomes:

Outcome	What to do next
Performance has met the required standard	Close the formal process in writing. Confirm the outcome positively and continue regular one-to-ones to sustain improvement.
Partial improvement — making progress but not yet at standard	Consider a short extension (with documented reasons) and continued support. This demonstrates reasonableness to a tribunal if the case later escalates.
No meaningful improvement	Hold a final capability hearing. You may issue a formal warning or, if all reasonable steps have been taken, consider dismissal as a last resort. Always offer the right to appeal.

Whatever the outcome, document it immediately. The paper trail you have built throughout this process is your defence if the matter is ever challenged at tribunal.

It is worth noting that dismissal for capability must always be a genuinely last resort. Before dismissing, consider whether the employee could be redeployed into a different role that better suits their current abilities. Overlooking this step is a common reason capability dismissals are found to be unfair.

Frequently asked questions

Can I put someone on a PIP straight away without an informal conversation first?

In most cases, no. ACAS guidance expects employers to attempt informal resolution before moving to a formal process. Jumping straight to a PIP without any prior conversation is likely to be seen as unreasonable by a tribunal, particularly if the employee was unaware their performance was a concern. There are rare exceptions — very serious or sustained failures where informal steps have clearly already run their course — but these should be discussed with HR or legal advice before you proceed.

What if the employee says their underperformance is due to a health condition?

Take it seriously. You must consider whether the health condition amounts to a disability under the Equality Act 2010 — broadly, a physical or mental impairment that has a substantial and long-term effect on day-to-day activities. If it does, you have a legal duty to consider reasonable adjustments before progressing the capability procedure. Depending on the complexity, it may be worth seeking occupational health input. Seek specialist legal advice if you are unsure.

How long should a Performance Improvement Plan last?

There is no single legal answer, but 8 to 12 weeks is the most common timeframe for retail roles. The key is that the duration must be long enough to give the employee a genuine opportunity to demonstrate improvement. A two-week PIP for a complex skills gap will almost certainly be challenged as unreasonable. If in doubt, err on the side of a longer timeframe with more structured support.

Does the employee have the right to be accompanied to a capability meeting?

Yes. Under the Employment Relations Act 1999, employees have a statutory right to be accompanied by a trade union representative or a fellow worker at any formal disciplinary or grievance hearing — and this right extends to formal capability meetings. You must not deny this right. If the chosen companion cannot attend on the proposed date, the employee can request a postponement of up to five working days.

What is the difference between a capability dismissal and a conduct dismissal?

A capability dismissal occurs when an employee is dismissed because they cannot meet the required standard, despite being given a fair opportunity to improve with appropriate support. A conduct dismissal occurs because of behaviour — something the employee chose to do or not do. Both are potentially fair reasons for dismissal under the Employment Rights Act 1996, but they follow different procedures. Using the wrong procedure for the wrong reason is one of the most common causes of unfair dismissal findings, so it is worth getting this distinction right from the start.

Managing underperformance is never comfortable, but a fair, structured, and well-documented process is the best outcome for everyone — including the employee. If you need support preparing for a capability meeting, a PIP conversation, or any other formal HR discussion, CoachScript's script generator gives retail line managers a structured, ACAS-aligned starting point in minutes. For related guidance on handling formal proceedings, read our post on how to conduct a disciplinary hearing.