How Do You Safely Terminate an Underperforming Employee?
• 07 Jul 25
“Not every hire will work out. That’s not failure-it’s reality.” Matt Glynn - Managing Director GLS Group
Introduction
Hiring humans means accepting human variability. Some will thrive. Some will flounder. And some will quietly erode your culture, your output, and your leadership confidence.
This isn’t about cruelty. It’s about clarity. Because when underperformance is tolerated indefinitely, it doesn’t just hurt the business-it hurts the team, the mission, and the very idea of accountability.
This Blog offers a potential universal framework for safely exiting underperforming employees. It’s not jurisdiction-specific. It’s not built on fear. It’s built on reason, fairness, and operational necessity.
Because good and bad leavers are part of business. And if we don’t learn to manage exits well, we’ll keep hiring badly-and bleeding slowly.
Why This Topic Is Important
As Founder, being across how to exit an employee is extremely important. The employee ideally will be your greatest asset, but the problem employee can cause:
◼️Morale Risk: Tolerating poor performance signals to high performers that effort doesn’t matter.
◼️Leadership Paralysis: Fear of legal backlash can freeze decision-making.
◼️Cultural Erosion: One underperformer can poison team dynamics.
◼️Operational Drag: Output suffers when weak links aren’t addressed.
◼️Legal Exposure: Mishandled exits invite claims, audits, and reputational damage.
◼️Investor Confidence: Poor team hygiene signals weak governance.
◼️Founder Burnout: Avoiding hard conversations leads to emotional exhaustion.
◼️Retention Risk: Good people leave when bad ones stay.
◼️Brand Damage: Toxic exits can spill onto Glassdoor, LinkedIn, and beyond.
◼️Scalability Block: You can’t scale dysfunction.
People Also Asked (PAA):
◼️Can I fire someone for poor performance without being sued? You can never stop someone from suing you but the question becomes - will they win. So, you must always follow a fair process and document everything.
◼️What documentation do I need before terminating an employee? Records of feedback, performance issues, and a structured improvement plan.
◼️How long should a performance improvement plan last? Typically 30-90 days, depending on the role and severity of issues - but check for guidance in your jurisdiction.
Consequences of Not Addressing These Issues
⚖️Legal Implications
◼️Wrongful Termination Claims: Lack of documentation or process invites litigation.
◼️Discrimination Allegations: Inconsistent treatment can trigger bias claims.
◼️Regulatory Scrutiny: Poor HR hygiene attracts compliance audits.
💼 Commercial Implications
◼️Client Impact: Underperformance can bleed into client delivery.
◼️Reputation Risk: Word spreads-internally and externally.
◼️Lost Opportunities: Weak teams repel strategic partnerships.
🛠️ Operational Implications
◼️Team Dysfunction: Accountability collapses when standards aren’t enforced.
◼️Process Breakdown: Underperformers often ignore SOPs and deadlines.
◼️Managerial Fatigue: Leaders burn out trying to “coach” what can’t be coached.
📉 Biz Valuation Issues
◼️Due Diligence Red Flags: Investors spot weak team structures instantly.
◼️Leadership Credibility: Founders who can’t manage exits lose trust.
◼️Scalability Concerns: Dysfunction doesn’t scale-it implodes.
Disclaimer: The relevance and severity of these risks depend on your jurisdiction, employment contracts, and internal governance.
What You Need to Be Doing
1. Define Performance Clearly Set measurable expectations from day one. Vague goals breed vague accountability.
2. Document Everything Keep records of feedback, coaching, and missed targets. If it’s not written, it didn’t happen.
3. Use a Structured Improvement Plan Offer a time-bound, documented plan with clear metrics.
4. Communicate Transparently Don’t sugarcoat. Be direct, respectful, and consistent.
5. Consult Internally Loop in HR, legal, or trusted advisors before initiating termination.
6. Exit with Dignity Keep it short, factual, and humane. No blame. No drama.
7. Protect the Business Secure assets, revoke access, and manage messaging.
8. Debrief the Team Frame the exit as a business decision-not a personal attack.
9. Review and Refine Every exit is a learning opportunity. Improve your hiring and onboarding accordingly.
There are many more steps depending on your business size, jurisdiction, and internal policies.
PAA Q&A:
What is a performance improvement plan (PIP)?
◼️A: A formal document outlining performance gaps and improvement steps.
How do I know when it’s time to terminate?
◼️A: If there’s no improvement after a structured plan, delay only increases damage.rated a low-output employee for 18 months. Morale collapsed. Two top performers quit. The founder later admitted: “I was afraid to fire her. I didn’t want to be the bad guy.”
Case Study 2: The Legal Landmine
An exit was rushed without documentation. The employee filed a claim. The business spent $40K in legal fees and settled quietly.
Case Study 3: The Culture Cleanse
A founder implemented a structured exit framework. Over 12 months, three underperformers were exited respectfully. Team output doubled. Investor confidence soared.
Frequently Asked Questions
Q: Can I terminate someone without a performance improvement plan?
A: Technically yes, but it’s risky. A documented plan shows fairness and protects against claims.
Q: How long should I wait before deciding to exit?
A: If there’s no improvement after a structured plan, delay only increases damage.
Q: What if the employee is popular but underperforming?
A: Popularity doesn’t justify poor output. Culture must be built on contribution, not charisma.
Understanding the Legal Terminology
◼️PIP (Performance Improvement Plan): A formal document outlining performance gaps and improvement steps.
◼️Constructive Dismissal: When an employee resigns due to employer conduct that breaches contract.
◼️Wrongful Termination: Termination that violates legal or contractual obligations.
◼️At-Will Employment: A legal doctrine allowing termination without cause (jurisdiction-dependent).
◼️Due Process: Fair procedural steps before disciplinary action or termination.
How GLS Can Help You
By building your legal team capability on the GLS platform, you will be able to:
◼️Design regulator-ready termination frameworks
◼️Draft performance improvement plans and documentation templates
◼️Advise on internal governance and stakeholder messaging
◼️Support founders in high-risk or high-emotion exits
◼️Build scalable HR hygiene for growth-stage businesses
Final Thoughts
Exiting an under performer isn’t failure-it’s leadership. It’s the act of protecting your team, your mission, and your standards. Done well, it builds trust. Done poorly, it breeds fear.
Hire humans, and you’ll have exits. That’s reality. But with the right framework, those exits can be clean, fair, and future-proof.
Observations and Tips
- Document Performance Issues Properly: Maintain written records of poor performance, warnings, feedback sessions, and improvement plans.
- Use Clear Performance Expectations: Employees should understand job responsibilities, targets, and evaluation standards clearly.
- Provide a Fair Opportunity to Improve: Employers should allow reasonable time, guidance, and support before termination decisions are made.
- Follow Employment Contracts & Company Policies: Termination procedures should comply with contractual obligations and internal HR policies.
- Comply With Labour & Employment Laws: Notice periods, severance obligations, and statutory protections must be carefully observed.
- Conduct Performance Reviews Professionally: Meetings and feedback discussions should remain objective, respectful, and well-documented.
- Avoid Discriminatory or Retaliatory Conduct: Termination decisions should never be based on protected characteristics or employee complaints.
- Protect Confidential Information & Company Assets: Access rights, confidential data, and company property should be managed during the exit process.
- Plan Internal & External Communication Carefully: Termination handling should minimise operational disruption and reputational risk.
- Use Exit Documentation Properly: Termination letters, final settlements, and post-employment obligations should be clearly documented.
- Train Managers on Termination Procedures: Improper handling by supervisors often increases legal and workplace risks.
- Avoid Reactive or Emotional Termination Decisions: Poorly managed dismissals can result in litigation, employee disputes, and reputational damage.
Startup Legal Support Centre
Build your own legal department with our online platform of startup-focused legal tools.
Startup Legal Guide Map
Explore the Guide Map to grow your business while staying on top of legal essentials.
Legal On Call™ (Free Trial)
Sign up for GLS Legal On Call™ and get expert answers to your startup legal needs.
Pro Bono Startup Legal Clinic
Get free expert legal advice at the GLS Pro Bono Clinic and power your business forward.
