Most business owners will tell you that managing poor performing employees is one of the more difficult aspects of management. Mismanagement of this delicate issue could have far reaching consequences on the business, from inefficiency to possible legal liability.

The challenging part about managing poor performing employees is that there is simply no objective measurement of what amounts to “poor performance”. An individual’s performance is for most parts subjective, given that different supervisors and managers may have different standards. What is acceptable to one supervisor may be completely unsatisfactory to another. Even something that on the surface appears objective (eg: amount of sales, number of files handled , etc) doesn’t necessarily reflect whether an employee is a “good” employee or not.

Generally speaking, poor performance is a valid ground to dismiss an employee. However, given the subjective elements mentioned above, Malaysian law does require employers to fulfil certain criteria before they can terminate an employee for poor performance. The requirements can be summarised as follows:

  • The employee must have been warned about his poor performance
  • The employee must have been given sufficient opportunity to improve
  • Notwithstanding the above, the employee has failed to sufficiently improve his performance

In the event an employee is dismissed on grounds of poor performance and he files a complaint of unfair dismissal, the burden is on the employer to prove that they have met the aforesaid criteria.


Employees who have not been performing up to par should be adequately warned that their performance has not been satisfactory. It is advisable for such warnings to be in written form and acknowledged by the employee although this is not mandatory by law. The difficulty with oral warnings is that it leaves unnecessary room for parties to challenge what exactly was said. Further, as trials usually take place years after the actual incident, poor recollection of witnesses may affect their credibility and make it difficult to convince the Court that the employee actually received a warning.

A warning on poor performance should state the areas of the employee’s performance that are shortcoming. The employer should also provide realistic and reasonable target goals or key performance indicators (KPIs) for the employee to achieve. The warning should also state a time frame given to the employee to improve his performance, before a reassessment is carried out.

Opportunity to Improve

After giving a warning, the employee must be given a chance to improve.  An adequate and reasonable time frame must be given depending on the standard of performance the employee is expected to achieve. For example, if the employee is a salesperson and has not been meeting his sales targets, it would not be reasonable to ask him to double his sales within 2 days or risk termination.

The employer must also provide whatever necessary guidance and support to the employee to help them improve their performance. Let’s say that an employee’s poor performance is due to his lack of technical knowledge or expertise. The employer in that case should assist the employee by providing him with training and guidance.

Employers must be mindful that they should not, intentionally or unintentionally, set up their employees to fail. Setting unreasonable goals, or depriving employees with the necessary resources which they will need to improve their performance, will not be looked upon favourably by the Courts.

Failure to Improve

Finally, if despite being warned and given sufficient opportunity to improve, the employee is still unable to improve their performance, the employer may consider terminating the employee on grounds of poor performance. However, the employer must be able to demonstrate that there was a clear and consistent failure to meet the standard of performance required of the employer.

Practical Tips for Managing Poor Performers

Employers are advised to carry out these steps before even considering termination:

  1. Document everything. While having face-to-face meetings or telephone discussions about an employee’s performance may feel more “natural”, employers are still advised to minute these discussions for record purposes. These minutes do not necessarily have to be in a formal format, and can even take the form of a simple e-mail sent to the employee to confirm the matters discussed.
  2. If there are specific standards expected of the employee, this should be communicated from the outset. If, for example, punctuality is a material part of an employee’s performance assessment, the employee should be made aware of this as early as possible. It is unfair for an employer to continuously allow an employee to come in late for work, and then later bring it up later as a ground for poor performance.
  3. All e-mails and correspondence (even informal correspondence) about an employee’s performance should be kept and stored in the employee’s personnel file. Even text messages can be used as evidence in the event of a dispute.
  4. Where possible, job descriptions and expectations should be created for all employees regardless of job category.
  5. Performance assessments and appraisals should be conducted consistently and during regular periods – at least once a year, although it is now becoming more common for companies to also conduct quarterly or half-yearly performance appraisals. This gives the employer more opportunities to highlight areas of an employee’s performance which could be improved.
  6. Where possible, performance assessments should be based on objective criteria that is the same for all employees in the same category or job description.
  7. Managers or supervisors should be trained on how to assess performance in line with the company’s procedures and requirements. There is little point in having a sophisticated performance review procedure if your managers and supervisors don’t follow the procedure or can’t understand what they need to do.
  8. Reasons and comments should always be stated in the performance assessment, whether the performance is good or bad. The phrase “no comment” is dangerous because it can be interpreted either way.
  9. Employees must be given the opportunity to explain their shortcomings. There could be contributing factors to the employee’s poor performance (eg: not enough manpower or support; not enough resources allocated to the employee’s function in order for them to achieve success etc
  10. The employer should set short, medium and long term goals for the employee. Goals and targets should follow the SMART rule – be Specific, Measurable, Achievable, Realistic and Timely. For example:
  •  What NOT to do: “Improve your sales”, “Be better at customer management”
  • What you should say: “Improve your monthly sales by 20% before December 2015”, “Resolve all customer complaints within 7 days from the date of complaint”

Employers should remember that performance management is not a “once a year” or even a “twice a year” activity. It is an ongoing process, but if done correctly, could reap significant rewards in terms of staff morale and business efficiency.


ABOUT THE AUTHOR. Donovan Cheah is a partner at Donovan & Ho. He is an advocate and solicitor of the High Court of Malaya, and his writings have been featured in publications like The Star, the American Chamber of Commerce updates, and Asialaw.

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