Managing people is a core responsibility for any employer. While leading a team can be rewarding, it also comes with challenges. Even high-performing organizations may occasionally face employees who consistently underperform, exhibit inappropriate behavior, or simply aren’t a good fit for their roles. The good news: with a strategic approach, you can address these issues while minimizing financial and legal risks.
Exploring Your Options
When an employee isn’t meeting expectations, you generally have three paths forward:
- Retraining through a Performance Improvement Plan (PIP)
A formal PIP can help employees get back on track. However, serious misconduct—such as harassment or safety violations—typically requires disciplinary measures beyond a PIP. - Reassignment to a Different Role
Sometimes, a transfer to a more suitable position can resolve performance issues. - Termination (When Legally Permissible)
Termination is often the most complex and risky option. Firing an employee can lead to lawsuits, increased unemployment tax rates, and costly turnover. Always seek legal guidance before taking this step.
Even when termination is for cause, employers must respond to unemployment claims and provide documentation to deny benefits. Poor performance alone usually doesn’t disqualify an employee from receiving unemployment benefits.
Investigate Before Acting
Before making any decision, conduct a thorough investigation:
- Did the employee misrepresent qualifications during hiring?
- Has their behavior been unethical, unprofessional, or dangerous?
- Could onboarding or training deficiencies have contributed to the problem?
Sometimes, the root cause lies in unclear expectations or inadequate resources. Engage in an open, good-faith conversation with the employee to understand their perspective and clarify your concerns.
Take a Measured Approach
If informal discussions don’t resolve the issue, follow a structured process:
- Consult HR or legal advisors before issuing formal warnings or discussing termination.
- Document performance issues with dates and details.
- Start with a private verbal warning, remaining calm and professional.
- Use neutral language and avoid statements that imply bias or retaliation.
- Stick to documented facts and company policy.
- Clearly outline what needs to change and confirm the employee understands.
For performance-related concerns, a formal PIP aligned with best practices is recommended. For serious misconduct, disciplinary action under proper procedures is necessary.
Seek Professional Guidance
If you’re unsure how to proceed, consult an employment attorney to ensure compliance with labor laws. Additionally, consider working with financial advisors to assess the impact of turnover and unemployment claims. A proactive approach helps maintain a productive, legally compliant workplace.
©2026
Frequently Asked Questions
1. What is a Performance Improvement Plan (PIP)?
A PIP is a formal process that outlines specific performance goals and timelines to help employees improve and meet expectations.
2. Can I terminate an employee for poor performance?
Yes, but termination for poor performance carries legal and financial risks. Always document issues and consult legal counsel before proceeding.
3. How do I handle serious misconduct?
Misconduct such as harassment or safety violations typically requires immediate disciplinary action, not a PIP.
4. What should I document before firing an employee?
Keep detailed records of performance issues, dates, conversations, and any corrective actions taken.
5. Do employees fired for cause receive unemployment benefits?
In most cases, poor performance does not disqualify employees from benefits. Misconduct may, but employers must provide proof.