Purpose and Scope
This policy sets out how [Organisation Name] handles performance and health-related capability issues.
It applies to all employees who have completed probation. Employees currently on probation fall under the Probation Policy. This procedure does not cover misconduct, which is managed under the Disciplinary Policy.
Working through related paperwork at the same time? See also our Performance Review & One-to-One, Adoption Leave Policy and Annual Leave Policy.
Distinguishing Capability from Conduct
Capability is about ability (“cannot”). It applies when an employee tries to meet standards but lacks the skill, knowledge, or health to do so.
Conduct is about behavior (“will not”). It covers issues like carelessness, persistent lateness, or refusing to follow reasonable instructions.
Line managers must consult [Role] before starting formal proceedings under either procedure. If the cause of underperformance is unclear, start with an informal capability discussion.
Responsibilities
- Line Managers: Set clear performance standards, give prompt feedback, and manage informal resolution before taking formal action.
- [Role, e.g., HR Lead]: Advise on procedure selection, guide formal stages, and keep official records.
- Hearing Managers: Remain impartial, avoid prior involvement in the case where practical, and base all decisions strictly on the evidence presented.
- Employees: Engage constructively with feedback, attend scheduled meetings, and disclose factors affecting performance, such as health conditions or training needs, as early as possible.
Informal Stage
The informal stage resolves performance issues before moving to formal action.
- The line manager schedules a private meeting with the employee.
- The line manager details the performance gap using specific examples.
- Both parties discuss contributing factors and agree on corrective actions, such as targeted training, coaching, adjusted priorities, or closer supervision.
- The line manager sets a review period of [Number] weeks.
- The line manager writes a summary note of the meeting and gives a copy to the employee. This note is not a formal warning.
Formal Stage 1: First Written Warning and Improvement Plan
- Invite the employee to a formal capability meeting in writing, giving [Number] days’ notice. Include all supporting evidence and confirm their right to be accompanied by a workplace colleague or trade union representative.
- Hold the meeting to outline the performance gap, hear the employee’s explanation, and review any factors raised, such as health issues or training needs.
- If capability concerns are confirmed, issue a first written warning and set up a Performance Improvement Plan (PIP). The PIP must detail specific objectives, required support, measurement criteria, and a review period of [Number] weeks.
- Send written confirmation of the outcome, stating the warning’s duration of [Number] months and the employee’s right to appeal.
- Hold regular progress reviews throughout the PIP review period.
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Formal Stage 2: Final Written Warning
- If progress during Stage 1 is insufficient, invite the employee in writing to a Stage 2 formal meeting. Provide the required notice and confirm their right to accompaniment.
- Review performance against the PIP objectives and decide the outcome:
- Close the process if performance has improved and sustained.
- Extend the PIP period if the employee shows clear progress but has not fully met standards.
- Issue a final written capability warning and set a further improvement plan.
- State in the final written warning that failure to meet standards within the specified timeframe may result in dismissal.
- Assess available redeployment options to alternative roles.
Formal Stage 3: Capability Hearing
- Invite the employee in writing to a formal capability hearing chaired by [Role/Senior Manager not previously involved]. Provide the complete evidence pack, [Number] days’ notice, and notice of the right to be accompanied.
- Hold the hearing and decide the outcome:
- No further action.
- An extended improvement period.
- Redeployment to a suitable alternative role.
- Dismissal with notice on grounds of capability.
- Confirm the outcome and rationale in writing, including details on how to appeal.
Ill-Health Capability
When health conditions impact capability, management will base all decisions on medical evidence:
- Get medical advice from an occupational health practitioner or GP with the employee’s written consent.
- Consider reasonable adjustments under legal obligations, including the Equality Act 2010.
- Consult directly with the employee about their prognosis, capability assessments, and workplace options.
- Explore redeployment opportunities before calling a formal capability hearing.
- Treat dismissal on ill-health grounds as a last resort, used only when medical evidence and consultation show no reasonable prospect of recovery or return to the role, or a suitable alternative, within a reasonable timeframe.
Appeals
- An employee can appeal any formal warning or dismissal decision by writing to [Role] within [Number] days of notification, stating their specific grounds for appeal.
- An independent manager senior to the original decision-maker will hear the appeal.
- The appeal outcome is final and will be confirmed in writing.
Records and Policy Review
- Store all formal invitations, meeting notes, Performance Improvement Plans, written warnings, and outcome letters in [Location/System] for [Number] years.
- [Role] maintains and reviews this policy.
- Review frequency: [Frequency].
- Next review date: [Date].
FAQs on Capability Policy & Procedure
What is a capability policy and procedure?
A capability policy and procedure sets out how your organisation handles performance and health-related capability issues.
Having it written down means the same rules apply to everyone, so managers are not making judgement calls case by case under pressure.
What does a capability policy and procedure include?
This template covers distinguishing capability from conduct, informal stage, formal stage 1: first written warning and improvement plan and formal stage 2: final written warning.
Every section is written to be filled in. The bracketed placeholders mark the decisions that are yours to make, such as timescales, approval owners and retention periods.
How to implement a capability policy and procedure with Whale
Copy this template into Whale and work through the bracketed placeholders so it reflects how your organisation actually operates.
Assign it to the teams it applies to so it sits where people work rather than in a shared drive, and set a review date so it gets revisited on schedule instead of quietly going out of date.
Use our templates to fast-track your documentation
Customize this template and 100s of others for free in Whale, the fastest way to get your team aligned.
