People operations and HR outsourcing · · 7 min read · 1,640 words
Poor performance and incapacity: a fair process under the 2025 Code
By the LabourLink editorial team. Last reviewed 17 October 2026.
The short answer
Capacity is a no-fault ground for dismissal. Under the 2025 Code of Good Practice: Dismissal, poor performance needs evaluation, support, a reasonable time to improve and a chance to respond, and ill health needs an investigation and a genuine search for alternatives.
Capacity is a separate ground
South African law recognises three fair grounds for dismissal: the employee's conduct, the employee's capacity and the employer's operational requirements[1]. The Labour Relations Act provides that a dismissal that is not automatically unfair is unfair unless the employer proves a fair reason related to conduct, capacity or operational requirements, and a fair procedure[2]. Anyone deciding whether a dismissal was fair must take any relevant code of good practice into account[2].
Capacity covers two quite different situations. The first is poor work performance: the employee is trying, but the work is not up to standard. The second is incapacity: ill health, injury or another circumstance prevents the employee from doing the job. Neither is misconduct. The employee has not broken a rule, and treating a capacity problem as a disciplinary matter is one of the most common errors employers make.
The 2025 Code replaces the old Schedule 8
The Code of Good Practice: Dismissal published on 4 September 2025 took effect on the date of publication and repealed the earlier Schedule 8 Code of Good Practice: Dismissal, together with the 1999 Code on operational requirements[1]. The new Code is itself styled Schedule 8[1]. Policies and templates written under the old Code should be checked against the new text. The principles on poor performance and incapacity are broadly familiar, but the wording and structure have changed.
Poor performance after probation
The Code is direct. After probation, an employee should not be dismissed for unsatisfactory performance unless the employer has given the employee appropriate evaluation, instruction, training, guidance or counselling and, after a reasonable period of time for improvement, the employee continues to perform unsatisfactorily[1]. Before dismissing, the employer should give the employee an opportunity to respond to the allegations of unsatisfactory performance[1].
The four questions
The Code tells anyone judging a poor performance dismissal to consider whether the employee failed to meet a performance standard and, if so, whether[1]:
- the employee was aware, or could reasonably be expected to have been aware, of the required standard;
- the employee was given a fair opportunity to meet it;
- the standard was reasonably achievable; and
- dismissal was an appropriate sanction for not meeting it.
Each question points to a document. Awareness points to a job description, a signed set of targets or a record of the conversation in which the standard was explained. Fair opportunity points to a performance improvement plan, training records and review notes. Achievability points to evidence that others in the same role meet the standard under similar conditions. The appropriateness of dismissal points to the alternatives considered, such as a different role or further support.
Senior and highly skilled employees
The Code accepts that, depending on the circumstances, an employer may not be required to warn an employee that dismissal may follow if performance does not improve[1]. It gives two examples: managers and senior employees whose knowledge and experience enable them to judge whether their performance is adequate, and employees with a high degree of professional skill where a departure from that standard would have severe consequences[1]. This is an exception for particular cases, not a general rule for everyone with a management title.
Running a performance process
A practical process has five stages.
1. Identify the gap
Describe the shortfall in specific, measurable terms. "Not performing" is not a standard. "Processed an average of 42 claims a week against a team standard of 60 over the last quarter, with an error rate of 8 percent against 2 percent" is.
2. Meet and listen
Meet the employee, explain the concern with examples and ask for their view. Many performance problems have causes the employer can address: unclear instructions, inadequate tools, a heavy workload, a health issue or a personal crisis. The answer shapes everything that follows.
3. Agree a plan
Set out the standard, the support the employer will provide (instruction, training, guidance or counselling[1]), the review dates and the period for improvement. The Code requires a reasonable period[1] and does not fix a number of weeks. The right period depends on the job. A sales cycle of three months cannot be judged in three weeks.
4. Review honestly
Hold the reviews on the agreed dates. Record progress and continuing gaps. If the employee improves, say so and close the process. If not, record what has been tried.
5. Hear the employee before deciding
If dismissal is under consideration, give the employee the chance to respond to the allegations of unsatisfactory performance[1]. Consider alternatives, such as a different role better suited to the employee's skills, before deciding.
Incapacity: ill health and injury
The Code deals with ill health and injury separately. Incapacity may be temporary or permanent[1].
Temporary incapacity
If an employee is temporarily unable to work, the employer should investigate the extent of the incapacity or injury[1]. If the employee is likely to be absent for a time that is unreasonably long in the circumstances, the employer should investigate all possible alternatives short of dismissal[1]. Relevant factors include the nature of the job, the period of absence, the seriousness of the illness or injury and the possibility of securing a temporary replacement[1].
Permanent incapacity
In cases of permanent incapacity, the employer should ascertain the possibility of securing alternative employment, or of adapting the employee's duties or work circumstances to accommodate the disability[1].
The employee's voice
During the investigation, the employee should be allowed to state a case in response and to be assisted by a trade union representative or fellow employee[1].
Work-related injury and illness
The Code says particular consideration should be given to employees who are injured at work or incapacitated by a work-related illness, and that in these circumstances the employer's duty to accommodate the incapacity is more onerous[1].
Substance dependence
The degree and cause of incapacity are relevant to fairness. The Code gives alcoholism and drug abuse as examples where counselling and rehabilitation may be appropriate steps to consider[1].
Sick leave is not the same as incapacity
The Basic Conditions of Employment Act gives employees paid sick leave equal to the number of days they would normally work in six weeks, in each 36-month cycle[3]. An employee who uses sick leave is exercising a statutory right, and occasional absences within the entitlement are not, on their own, an incapacity problem. Incapacity becomes the question when the absence is long, the prognosis is uncertain or the employee cannot do the job even when present.
Medical certificates have a role. An employer is not required to pay sick leave for an absence of more than two consecutive days, or for absences on more than two occasions in eight weeks, if the employee does not produce a medical certificate on request[3]. That rule is about payment. It does not replace a proper incapacity investigation.
Disability and discrimination
Disability is one of the listed grounds on which the Employment Equity Act prohibits unfair discrimination in any employment policy or practice[4]. That matters in incapacity cases. An employer that dismisses an employee because of a disability without exploring accommodation, as the Code requires for permanent incapacity[1], risks a discrimination claim as well as an unfair dismissal claim. A dismissal for an automatically unfair reason, which includes unfair discrimination on grounds such as disability, carries a higher compensation ceiling[2].
Other forms of incapacity
The Code recognises that incapacity may arise from causes other than health, including imprisonment, and asks the employer to assess the extent of the incapacity and investigate alternatives short of dismissal[1]. It also recognises that incompatibility, shown as an inability to work in harmony with the employer's business culture or with colleagues, can be a form of incapacity that may justify dismissal[1]. Incompatibility claims need careful handling and clear evidence, because they can easily mask a personality clash or a performance issue that has never been raised.
A worked example
A claims processor with six years of good service begins missing targets. Her manager meets her and learns that she has been diagnosed with a chronic condition that causes fatigue. The employer stops treating the matter as a performance issue and starts an incapacity investigation[1]. With her consent, it obtains a report from her doctor, who confirms the condition is manageable with treatment and recommends reduced hours for three months. The employer considers the nature of the job and the cost of a temporary replacement[1], agrees a temporary reduction in hours with an adjusted target, and sets review dates. She is assisted by a colleague at the meetings[1]. After three months her output is back to standard. Had the employer pressed ahead with a performance process, it would have missed the cause, and a later dismissal could well have been found unfair and discriminatory[4].
Common mistakes
- Using a disciplinary hearing for a capacity problem.
- Setting a standard the employee never saw.
- Allowing too little time to improve[1].
- Skipping the investigation into the nature and likely duration of an illness[1].
- Failing to consider alternative work or adapted duties for permanent incapacity[1].
- Treating lawful sick leave as misconduct[3].
Key points
- Capacity is a separate, no-fault ground: fair reason and fair procedure are both required[2].
- Poor performance after probation needs evaluation, support, a reasonable time to improve and a chance to respond[1].
- Ill health requires investigation, alternatives and, for permanent incapacity, consideration of accommodation[1].
- Work-related injury raises the bar for accommodation[1].
- Disability is a listed ground of unfair discrimination[4].
When to get specialist help
Capacity matters are sensitive and fact-specific. If an employee's performance is slipping, if an illness is likely to keep someone away for a long time, or if a disability or work-related injury is involved, book a LabourLink consultation early. A consultant can help you design a performance improvement plan, structure an incapacity investigation, prepare the meetings and document each step, so that whatever the outcome, the process is fair and the file is complete.