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managing capability

managing employee capability in your small business

As a small business employer, you’ll be used to your employees having 'good days and bad days'. Most of the time though, your employees will meet your expectations and get their work done on time and to an acceptable standard. Other times, however, an employee could experience a decline in their work performance.


In turn, this could lead to a ‘capability’ situation - an issue of poor employee performance which also applies to ill-health or injury.

So, what performance management techniques can you use to try to improve an employee’s performance? And how can you support those affected by ill-health or injury? Let’s find out…

capability at work

Capability in the workplace relates to issues regarding an employee’s skill, aptitude, health, or any other physical/mental quality. Employment law recognises that employers may need to dismiss an employee on grounds of 'capability'.

If an employee can’t perform the job you employed them to do, you can dismiss them. Even if they can still perform some of their duties, you can dismiss them on grounds of capability based on their performance.


A capability dismissal is fair if an employee doesn’t have the capability, competence, or qualifications to do the work you’ve employed them to do.

capability at work
dismissal due to capability

the two main reasons for a capability dismissal

There’s no one single HR procedure for dealing with capability. After all, you might be dealing with an employee with a health issue, or one with a performance issue.

That means you must approach each situation dynamically in order to avoid an unfair procedure (and potential Employment Tribunal claims - such as unfair dismissal).

Here’s how to approach the two main types of capability dismissal....

Capability due to performance

When a performance issue comes to your attention, set out measurable targets to help the employee improve. When you do this, also make the employee aware of the consequences if no improvement is made within an agreed timescale.

A performance management system will help you monitor and review the employee’s performance. It could be the case that the employee needs extra support or training to reach the expected standards of work.

When dismissing an employee on competency grounds for persistent poor performance, determine whether the dismissal related to employee competency is fair:

  • Do you believe that the employee is incompetent to carry out the job?

  • If so, do you have reasonable grounds to sustain that belief?


The procedure you will follow is similar to that used in misconduct dismissals. The procedure must comply with the rules of natural justice and your disciplinary procedure.

Capability due to ill health

Having an employee absent for an extended period or on a regular basis for health reasons can be frustrating for all - and disruptive.

An absence due to extended or frequent periods of ill health can give you reason to carry out an ill-health capability dismissal. As with dismissals due to performance, you must follow a fair procedure to avoid carrying out an unfair dismissal.

When carrying out an ill health capability dismissal, first obtain medical evidence that confirms that the employee’s return to work or recovery is unlikely. If there is conflict between the medical evidence obtained by the company and any presented by the employee in relation to the most likely date of return to work, get an independent opinion before going ahead with the dismissal.

A dismissal on ill health capability grounds must follow the principles of natural justice.

You should:

  • Ensure you’re in full possession of all material facts regarding the employee’s condition.

  • Give the employee opportunities to improve with some clear targets and timescales to make such improvements (outlining what the next steps will be if improvement isn't forthcoming).

  • Ensure the employee receives fair notice that you’re considering an ill health capability dismissal.

  • Provide the employee with an opportunity to defend and prove their case.

  • If the employee is incapable after a medical expert deems them so, ensure you explore reasonable accommodations that could help the employee to remain in employment, e.g., changing role, or the employee’s hours of work.

  • Only dismiss an employee as a last resort.

do you need help managing capability?

Get in touch with our friendly HR experts today!

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