Day One Employment Rights and Performance Management

Leading up to the General Election on 4th July 2024, much was made of Labour’s so-called “100 day plan” forming part of their manifesto to kickstart economic growth. They pledged to introduce legislation within 100 days to implement ‘Labour’s Plan to Make Work Pay: Delivering a New Deal for Working People’. Introducing Day One basic employment rights and protection from unfair dismissal will bring Performance Management into sharp focus. Employers will need to be fair and transparent in dealing with employees who are not meeting their standards, so a robust Performance Management process - including recruitment, onboarding and probation - will be key.

Organisations will no longer be able to rely on the two-years’ service grace period to dismiss an employee if things aren’t working out. Managing someone’s performance from day one is good practice. You’ve gone to considerable effort to find that person, they have bought into the dream and they want to work with you. Making organisations and their managers focus on setting people up for success is surely a positive thing for us all. Good established businesses do this as a matter of course. For those businesses that don’t have this culture, the prospect could be seen as daunting. Managers will need to work harder and have some earlier tough conversations, telling people how they can improve and support them to do it. The probation period will need to be consistent (in line with ACAS guidelines) and applied fairly by each manager.

Look at the upside once that change has successfully been achieved.

• Managers accountable for their teams’ performance, and focussing on each of their team and the development path they are on.

• Ensuring that people start to work successfully in their roles from day one, and contribute to an organisation’s performance.

• That learnt skill of tackling performance (and behaviour) issues and managing it would also spread across the entire workforce.

So although the new legislation may require additional work and be a pain to implement, let’s see how we can make it work for the benefit of the organisation and everyone employed in it.

Aligning employee performance with business success could be achieved by using widely accepted, decades-old, management philosophies.

Management by Objectives (MBO) was first promoted by Peter Drucker in 1954 in his book The Practice of Management. It is a theory as opposed a specific formula. To decentralise from top leadership and create teams and individuals focussed on the goals of the organisations through their own individualised objectives.

Also, Hoshin Kanri is a 7-step process for strategic planning, originating in post-war Japan, and since adopted across the world. It is a top-down approach where the strategic vision of the organisation is supported by goals set throughout the business.

Seventy years later, we see changes pending in UK employment law to necessitate the management of performance to be more focussed and detailed. The removal of the two-year-service rule for unfair dismissal claims and redundancies will require management in the UK to focus on performance of individuals like never before. If we are going to move the needle owing to the law, then why not seek to spend time using the MBO philosophy, one of the many techniques from Hoshin Kanri, OKRs and KPIs, to ensure all our employees are aligned to the business’s performance and goals of the organisation.

If I have you nodding at this, that’s because it’s pretty obvious! If we have employed someone, we have made an investment. Unless we set a target for that investment, how will we know if it has been successful?

But there is a problem here: if targeting and aligning all staff to the organisation’s goals and performance is so obvious, why does it so often break down?

It’s likely that the answer lies in management, and the priority that leadership gives (or fails to give) to this subject. Like all Change projects, unless you see the leaders supporting it and prioritising it, it won’t succeed. If setting targets and managing aligned objectives is introduced, but then leadership doesn’t deliver, then it isn’t a priority. If leadership does make it a priority but managers are given mixed messages that other things are more important, then the change won’t occur. Instead, short-term underperformance will be managed, currently through giving paid notice (to those with under two years’ service). The waste to businesses seeking to grow by hiring, firing and then rehiring, is scary! Not to mention that this option won’t be available when Day One Employment Rights become law.

If you really want a cohesive, focussed organisation, seek to introduce an aligned performance management approach with training and visible leadership support. By doing so you not only meet the legal expectations, but you beat your competition as well.

Time to incentivise your employees

It’s clear from our work within the SME community that many organisations don’t pay enough attention to ensuring their bonus and/or commission plans drive the right behaviours. In the majority of cases, a bonus is a discretionary option. Organisations strive to ensure staff know that there is no certainty of a bonus next year. Though that is a safer position to come from legally – and it’s arguably more ethical to not overpromise – there is another way. Incentivising staff via their company bonus scheme fosters buy-in to the objectives that will contribute to the company’s goals.

A good, well-planned scheme encourages every individual to seek to understand the performance of the organisation against its declared goals. By creating that focus and encouragement we also see individuals knowing how they are tracking with their own individual performance, and the role they play in helping their organisation hit its goals.

Of course, a bonus scheme is only viable if the organisation hits a threshold of performance and revenue that allows for it to pay out. The value of such a scheme is as follows:

1.      Staff don’t hold it against the manager or the organisation if they know clearly that the goals/targets in that year were not hit;

2.      It will encourage discretionary effort to help achieve the goals;

3.      It focusses all staff on what is critical that month / year in their role which in turn should enable faster delivery;

4.      It becomes affordable to the organisation.

A little tip to the growing business…

As a business, if you have plans to grow but are a little scared by the margins and returns, instead of an increase to salaries, perhaps the introduction of a bonus scheme may be a good route. Ensure there is upside to the bonus scheme if the business exceeds its targets (not simply the salary increase budget), so there is a risk and a reward at play.

When is it conduct and when is it capability?

First let’s take a look at some dictionary definitions.

Capability: the power or ability to do something.

Conduct: the manner in which a person behaves, especially in a particular place or situation.

Discipline: the practice of training people to obey rules or a code of behaviour; using punishment to correct disobedience. NOTE: punishment isn’t accepted in a disciplinary process.

Ideally organisations would separate conduct (Disciplinary Process) from capability (Performance Improvement Plan) through the use of a separate capability process. At a bare minimum the ACAS guidelines should be followed to carry out any disciplinary actions either based on conduct or capability.

Why the confusion?

Managers and businesses see a problem but don’t always classify and determine whether it is conduct- or capability-focussed. They know they need to do something but aren’t sure of the stages, or whether it needs to be a formal matter.

Ideally, if any action is needed you would always follow one category (conduct or capability) and not merge the two matters. If someone was aggressive towards a customer, for instance, this is highly likely to be conduct related, especially if they had previously received appropriate training. Alternatively, someone failing to deliver the required sales targets, so long as the individual was conducting themselves well (i.e. had the will), is likely to be capability, an issue of performance. In such a case, training may be one intervention to help them achieve success.

In all cases there is a required need to investigate and determine how severe the issue is.

The term “disciplinary process” has such negative connotations, especially in terms of capability issues. A Performance Improvement Plan (PIP) is one alternative to focus on improving without the formal disciplinary process necessarily being reached. It’s setting a series of goals for improved performance and understanding from the employee what help they need to get there. Done well it makes the individual responsible for their performance and their manager focussed on helping them.

Understanding the difference between capability and conduct is highly important for managers to navigate their way through employee rights. Managing people compliantly can be technical at times, and we are not all HR experts (nor should we need to be - but we need to be confident in the skills we do need).

One form of a capability issue is absence and, though most absences are genuine, the potential Day One right to Statutory Sick Pay (SSP) is likely to lead to further cases of frequent short-term absences.

Can I manage absence through disciplinary process?

The short answer is YES.

Sickness absence can be managed under the capability process, as long as you have managed the matter informally, used 121s to discuss any issues, and ideally put in return-to-work discussions when they have been off sick.

Essentially, the individual’s failure to be able to meet their contracted work becomes an issue in the longer term and should not be left. It should be managed proactively and consistently.

The issue here is that disability discrimination protection can cause employers to act shy and/or not bother. Disability discrimination requires us to make suitable reasonable adjustments. That requires regular conversations between the individual and the employer and may often require specialist medical advice for the employer. But, ultimately, the contract still needs to be met by the employee so, as long as the employer has acted reasonably, any form of sickness absence could lead to formal disciplinary or a capability process.

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So, what do you need to know, and how do you arm your managers with the correct skills to ensure you are ready for Day One Employment Rights? We can help you ensure your policies and procedures are clear and compliant, and put in place a performance management programme to support them. Please get in touch for a FREE discovery call.