Performance Issues vs Capability vs Conduct

One of the most common conversations we have with employers at HR:4UK starts with a simple sentence:  “We’re not sure which process we should be following.”  and our response usually starts with a simple but important question: is this a case of won’t, or can’t?

Behind that question usually sits uncertainty about whether an issue is one of performance, capability or conduct. Performance isn’t where it should be, attendance is patchy, or mistakes are creeping in (or becoming more frequent), or behaviour is starting to cause concern, but deciding whether an employee is unwilling to meet expectations, or genuinely unable to do so, can feel far from clear. The employer knows something isn’t right, but deciding whether the issue is one of performance, capability or conduct feels far less straightforward.

Getting this distinction wrong is one of the most expensive mistakes employers make,  not because they don’t have a reason to act, but because they follow the wrong route to address it.

This isn’t about new employment law. It’s about how tribunals assess fairness, reasonableness and process. Increasingly, claims succeed not because an employer had no grounds for concern, but because the issue was managed under the wrong framework.

Why the Distinction Matters More Than Employers Realise

From a legal perspective, performance, capability and conduct are not interchangeable. Each requires a different approach, a different emphasis, and often a different level of support or investigation. When employers blur the lines between them, they undermine their own position.

Performance issues tend to relate to how well an employee is doing their job. This might involve missed targets, poor quality work or failure to meet required standards. Capability, on the other hand, is usually linked to an employee’s ability to perform their role due to health, skill or capacity issues. Conduct focuses on behaviour, what an employee has done or failed to do, particularly where rules, policies or expected standards have been breached.

In practice, these categories often overlap, which is where employers get stuck. A drop in performance may be linked to stress or illness. Errors may stem from a lack of training rather than wilful disregard. Behaviour may deteriorate because an employee is struggling rather than deliberately misconducting themselves.

Tribunals understand this complexity but they expect employers to recognise it too.

The Risk of Taking the Wrong Route

One of the most damaging mistakes we see is where a capability issue is treated as misconduct. An employee who is struggling due to ill health, burnout or an underlying condition is pushed into a disciplinary process because mistakes are being made or deadlines are missed. This is where unfair dismissal and disability discrimination risk increases significantly.

Equally, managing clear conduct issues through an informal performance route can send the wrong message. Where behaviour breaches policies or impacts others, failing to address it robustly can weaken an employer’s position later and undermine standards across the business.

Performance issues also become legally risky when employers jump too quickly to disciplinary action without allowing time, support or clarity for improvement. Tribunals are particularly critical where employees are punished for underperformance without being given a fair opportunity to understand expectations and improve.

In all of these scenarios, the cost is rarely limited to the immediate issue. Poor process leads to grievances, long-term absence, loss of trust and, ultimately, legal claims that could have been avoided.

Why Employers Often Get This Wrong

In many cases, employers are trying to do the right thing. They want to act quickly, protect the business and avoid drawn-out processes. Informal management often sits in the background, with issues tolerated or loosely addressed until frustration reaches a tipping point.

By the time formal action is taken, emotions are heightened, relationships are strained, and the employer feels under pressure to resolve the situation swiftly. This is often when the wrong process is chosen, not because it is appropriate, but because it feels decisive.

From a tribunal’s perspective, however, decisiveness without fairness is rarely defensible.

What Tribunals Expect to See

Tribunals do not expect employers to be perfect. They do expect decisions to be reasonable, proportionate and based on a clear understanding of the issue being addressed.

This means employers should be able to show that they identified whether the concern was related to performance, capability or conduct, and that they followed a process aligned to that concern. Where health or wellbeing is a factor, tribunals expect employers to pause, explore and consider adjustments rather than press ahead regardless.

Importantly, tribunals will look at whether the employee understood what the issue was, what was expected of them, and what the consequences might be if things did not improve. Where those elements are missing, claims are far more likely to succeed.

What This Means in Practice for Employers

In practical terms, managing these issues well requires employers to slow down rather than rush to label a problem. Asking the right questions early can prevent significant risk later. Is this about skill, health or behaviour? Has the employee had the training and support they need? Are there any underlying issues that could explain what is happening?

Clear conversations, followed up in writing, are essential. So is consistency. Employees in similar situations should be treated in similar ways, and managers should feel confident using the appropriate processes rather than avoiding them.

Seeking HR advice at an early stage often helps employers choose the right route and avoid compounding problems through the wrong process.

The HR:4UK Perspective

At HR:4UK, we regularly support employers who had genuine concerns but followed the wrong framework to address them. In many cases, the outcome could have been very different if the issue had been identified and managed correctly from the outset.

Understanding the difference between performance, capability and conduct is not about legal technicalities. It is about fairness, clarity and protecting your business while treating employees appropriately.

Getting it right early is almost always less costly, financially, legally and emotionally,  than trying to fix it once things have escalated.