What is a Capability Policy?

What is a Capability Policy? For UK Small Businesses

In the modern workplace, the need for structured guidelines to prove you have treated employees consistently and fairly has never been more crucial. ✨

Therefore, having a Capability Policy to follow, when an employee does not perform in their role or doesn’t have the skills to do the job, is worth having. 

In this blog, I talk about what a Capability Policy is, why you need one and the procedure that forms part of it. 

What is a Capability Policy?

The purpose of the Capability Policy is to provide a framework for managing underperformance in a fair and consistent manner. The Policy differs from the Disciplinary, Sickness Absence and other policies as its primary focus is that of improving skills and performance to the standard required.

It's a proactive approach that focuses on improvement rather than punishment, recognising that every employee is an asset with untapped potential.

Why Do Businesses Need A Capability Policy

According to a recent study by the UK Office for National Statistics, organisations with robust capability policies experienced a 20% increase in employee satisfaction and a 15% decrease in turnover rates. These figures underscore the positive impact of such policies on both individual well-being and organisational success. 🎉

A Capability Policy provides a structured framework to tackle performance issues head-on. They embody an organisation's commitment to employee development, mental health, and overall well-being. By clearly outlining expectations and procedures, these policies create a fair and transparent environment, fostering trust and loyalty among employees.

They also ensure the Employee understands the process to go through, so they understand the steps and potential consequences. Typically, with Capability, the employee wants to do a good job. They are trying hard, they are just not capable. Perhaps they have been overpromoted, or the role has changed, or they over exaggerate their experience during the interview process.  

Here’s some examples of situations where having a Capability Policy is invoked:

👉 Performance Issues

This is where an employee consistently falls short of achieving performance targets or fails to meet the expected standards despite training and feedback.

👉 Skill Gaps

This is where an employee, due to changes in job responsibilities or industry advancements, lacks the necessary skills to perform effectively.

👉 Health-related Issues

If an employee's performance is impacted by health issues, whether short-term or chronic, then you may need to use the capability policy, to assist in managing workloads or providing necessary adjustments.

Conduct Vs. Capability Policies

You may be thinking that you would use your disciplinary policy for the above situations, but this is not the case. 

We use the Disciplinary Process for Conduct Issues - which is about an employee's behaviour at work. With poor performance, you should follow the disciplinary policy if the person could do the job, but they weren’t doing it because they didn’t care, were being sloppy or lazy (but previously had demonstrated they had the skill).  

Whereas Capability is about the employees skills and ability to do the job, and is handled in line with a Capability Policy.

Usually it's a capability issue if the employee has no control over it. For example, if an employee becomes unable to do their job due to a skills gap, illness or disability, adjustments or support could not help.

While they may seem similar, disciplinary and capability procedures are different in practice. 

Disciplinary Procedure

Capability Procedure

All conduct issues, such as poor performance, theft, bullying, lateness etc. 

You may use capability procedures for capability issues only.

Disciplinary procedures focus on a fair and thorough investigation, resulting in a decision and outcome.

Although the focus of capability procedures is on a fair and thorough investigation, it also focuses on supporting, encouraging and training your employee.

Disciplinary procedures usually have written warnings, but if it’s gross misconduct (a very serious issue) you can jump straight to dismissal

Capability procedures usually require warnings and notice before dismissal. 

You can use disciplinary procedures to address misconduct outside the workplace e.g. writing something bad on social media at the weekend. 

You cannot use capability procedures for capability or performance issues outside the workplace.

It's not always clear whether an employee's poor performance is due to capability or conduct, so if in doubt, typically I’d investigate first or go with the Disciplinary Policy. And then you can always switch to the Capability Policy if this better reflects the situation. 

The Capability Procedure to follow

Typically, within the Policy, you would also set out the procedures (i.e. the steps to follow). Here is the process in a nutshell. 

  1. Gather Facts: Start by gathering facts and evidence to show the shortfall areas in performance. This ensures that you can have evidence-based conversations with the employee. 
  1. Informal Resolution: If an employee isn't meeting standards, start with a friendly chat to encourage improvement. You would try to discuss and resolve the issue informally by providing training or support to help them make the improvements. Through discussion or even a performance improvement plan. If that doesn't work, go to the next step.
  1. Hold a formal Capability Meeting: Invite the employee to a formal meeting and discuss the issue. They have the right to bring a colleague or trade union rep to this meeting. If warranted, provide a warning. Agree how they need to improve their performance. 
  1. Review Performance & hold a second meeting if no improvement: Continue reviewing performance to track improvements. If there is no improvement, hold a second meeting and follow the same process. 
  1. Dismissal: If all else fails, dismissal may be considered. Capability is a fair reason for dismissal, but I’d suggest you seek HR advice before going down this route. You’ll need to show you have exhausted all options. You should also provide the option for the employee to appeal any decisions made.

Key elements to manage capability

👉 Training and Development: Capability policies emphasise the importance of continuous learning. Employers invest in training programs and resources to empower their workforce, ensuring they have the tools needed to excel in their roles.

👉 Honest & Regular Feedback: Honest feedback is a cornerstone of improvement. Regular, constructive feedback helps employees track their progress and encourages a culture of open communication.

👉 Monitoring and Adjustments: Capability policies are not static. They adapt to the evolving needs of both the employee and the organisation. Regular monitoring allows for adjustments and refinements, ensuring the policy remains effective.

Need a Capability Policy Template?

Recognising the critical role capability policies play in the workplace, we are proud to introduce our Capability Policy Template. 🎉

It comes as a Microsoft Word Document, so it's super easy for you to use. 


Capability Policy Template for UK small businesses
In the modern workplace, a Capability Policy is the thread that weaves success, growth, and employee well-being together. Grounded in a rich UK history, these policies have evolved to become indispensable tools for organisations aiming not just for profitability, but for sustainable success. 


As you embark on the journey of nurturing your workforce, remember that a Capability Policy is not just a document; it's a commitment to addressing poor performance in a fair and consistent way.  🌐✨


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