Capability-v- redundancy. Need it be a performance issue?

We often get instructed when employers reach the end of their tether with a poor performer.  When we advise what a performance process involves, we are often met with resistance because there’s neither the time nor inclination by that stage.  This invariably leads to discussions over redundancy as an alternative option. 

Performance process

In summary, a performance process involves a first and final written warning before a dismissal can even be contemplated.  And before any of those sanctions can be applied, there should be periods of review and assessment (of around 10 – 12 weeks each).  In addition the employer must provide training and support throughout. Before a decision to dismiss is made, the possibility of suitable alternative employment also needs to be explored.  Lastly, a right of appeal must be offered.

It is common for the process to last 9 – 12 months before dismissal and the emphasis should always be on avoiding dismissal and getting the individual back on track. The emphasis on performance often makes it personal and acrimonious.  Frequently, the added pressure on the individual results in stress absence and, sometimes, a grievance.

Redundancy process

Redundancy on the other hand requires a series of consultations over a few weeks, the main emphasis of which is to consult over the reasons business behind the redundancy, the process of selecting for redundancy and the exploration of alternatives to dismissal, including alternative employment. The business rational tends to take away some of the personal element (not always) and a redundancy payment can sweeten what is otherwise a bitter pill.  When you consider the average redundancy consultation takes 3 to 4 weeks (compared to a 9 – 12 month performance process), it’s not hard to see why employers are drawn down this path. 

If you find yourself pondering this dilemma and favouring redundancy, our advice has to be – you must accept the risk you are taking. Getting it wrong may cost you in the region of 9 months net pay of the individual concerned (a typical tribunal pay-out).  Tribunals are very good at drilling down into the primary motivation behind the dismissal and can spot a sham process from a hundred yards!

That said, just because someone is underperforming, does not mean that their role is immune from redundancy. In many situations, the poor performance may have led to a drop in profits which need to be recouped.  An employer is at liberty to organise its staff in such a way as it sees fit, to maximise efficiencies and profits. 

This does not mean that any underperforming employee can be dismissed under the label of redundancy rather than performance – far from it.  But consider where an individual performs a stand-alone role (i.e. there are no others doing the same or similar work), an employer could decide to dispense with that role and do things another way – such as redistribute the functions of a role amongst other employees.  As long as the business case underpins the process and weighs heaviest in the employer’s mind, then a redundancy dismissal is achievable.  It goes without saying, you should steer clear of any conversations concerning under-performance during the process and focus on the business reasons. 

We emphasise, this is a very fine line to tread, so it is imperative that you take legal advice when contemplating the redundancy of an under-performer.  Fundamentally, you will need to establish a sound business case – which will need to withstand scrutiny.  You should also dispense with the role entirely.  If you replace it with something very similar, that is likely to land you in hot water (and you would probably need to offer that as suitable alternative employment during the consultation). Also, things get more complicated where the poor performer is one out of a pool of employees doing the same or similar work. These are all risk areas that your adviser needs to assess.

Settlement agreements

As an added layer of protection, employers might wish to explore the use of a settlement agreement where they don’t feel on solid ground for a redundancy dismissal.  It’s relatively easy to introduce one without outwardly acknowledging any risk, if you are prepared to make an enhanced redundancy payment.  During the redundancy consultation, you could offer the employee the choice of statutory redundancy pay, or alternatively, enhanced redundancy pay subject to signing a settlement agreement.  This is a very common practice which doesn’t imply any weakness.  More often than not, employees prefer to take the cash up-front rather than the uncertainly of tribunal proceedings….if the price is right.  It is then up to you as to whether you wish to negotiate depending on how strong you think your redundancy case is.


Remember, if poor performance is the true reason behind a redundancy dismissal, you are taking a risk.  Where however, a genuine business case for redundancy can be established, the additional risk and cost of a redundancy dismissal may be acceptable to you.  But take advice first!

Key Contact

Fabio Grech - Performance Blog

Fabio Grech LLB (Hons) – Partner

Contact us on or 029 20 34 55 11 for a no obligation discussion or for further information.