How to set up a performance discussion with an employee-the right way

Performance conversations are a normal part of running a business but for many SME owners, they’re also one of the most uncomfortable.

Handled well, a performance meeting can improve clarity, confidence, and outcomes for everyone. Handled poorly, it can damage trust, morale, and expose your business to unnecessary risk.

If you employ people in Australia, there are clear expectations under the Fair Work Act about how performance concerns should be raised and managed. The good news? You don’t need a corporate HR department to get this right, just a fair, structured approach.

Here’s how to set up and run a compliant, effective performance discussion from start to finish.

1. Be clear on the purpose before you schedule anything and before you contact the employee, ask yourself:

• Is this a performance improvement discussion, not disciplinary action?

• Are the concerns specific, factual, and work related?

• What outcome are you seeking, clarity, improvement, support, or next steps?

Performance discussions should never come as a surprise. If the issue has been ongoing, make sure you can clearly articulate:

• What the concern is;

• When it has occurred;

• How it impacts the role or business; and

• What “improvement” would look like

This clarity protects both you and the employee.

2. Scheduling the meeting: timing and lead time matter. When scheduling a performance meeting:

• Avoid end of day Fridays or rushed time slots;

• Allow reasonable notice (generally 24–48 hours at a minimum); and

• Choose a private, uninterrupted setting (or secure video call for remote staff).

The Fair Work Act doesn’t prescribe exact notice periods, but procedural fairness requires employees have enough time to prepare and seek support if needed.

3. How to contact the employee (and what to say)

Contact the employee firstly in person (if possible) and then follow up in writing (email is appropriate) and keep the wording neutral and factual. Your message should include:

• The purpose of the meeting (e.g. “to discuss performance concerns”);

• The date, time, and location;

• That they may bring a support person; and

• Who will be present at the meeting.

Avoid:

• Ambiguous language;

• Accusatory wording; and

• Raising detailed allegations in the invite itself.

This isn’t about building a case, it’s about fairness and transparency.

4. The right to a support person

Under the Fair Work Act:

• Employees must be allowed a support person if the discussion could reasonably result in disciplinary outcomes;

• The support person is not an advocate, they are there to provide emotional support and help the employee participate fairly.

You don’t need to suggest who the support person should be, but you must not unreasonably refuse one if requested. Remember to document that this option was offered.

5. Running the meeting: how to approach the conversation

Start the meeting by:

• Explaining the purpose again;

• Confirming who is present;

• Stating the meeting is private and confidential;

• Explaining notes will be taken and all parties will be provided with a copy; and

• Setting a respectful, professional tone

When discussing the issue:

• Stick to facts and examples;

• Focus on behaviour and outcomes, not personality;

• Avoid assumptions or emotional language; and

• Give the employee time to respond

This is critical. Fair Work places strong emphasis on the employee being given a genuine opportunity to respond. Listen. Clarify. Ask questions.

6. Discuss expectations and improvement (not just the problem)

A compliant performance discussion doesn’t stop at “what’s wrong.” You should clearly outline:

• The expected standard or requirement;

• What needs to change;

• Any support, training, or adjustments available; and

• Reasonable timeframes for improvement.

This demonstrates that the business is acting reasonably and in good faith, a key consideration in any future Fair Work review.

7. Documenting the discussion properly

After the meeting, document:

• Date, time, and attendees;

• Issues discussed;

• Employee response;

• Agreed actions and timeframes; and

• Any support or resources offered.

Documentation should be:

• Objective;

• Accurate; and

• Free from emotive language.

This record protects both parties and ensures clarity moving forward.

8. Gaining employee agreement and confirming next steps

Before closing the meeting:

• Summarise what was discussed;

• Confirm agreed actions and expectations;

• Ask the employee if they have questions; and

• Explain what will happen next and when

Follow up in writing with a summary and invite the employee to confirm they’ve received and understood it. Agreement doesn’t mean they must like the outcome, it means expectations are clear.

Why this matters for SMEs

Many unfair dismissal and adverse action claims don’t fail because of the issue itself, they fail because the process wasn’t fair.

A structured, respectful performance discussion:

• Builds trust;

• Improves outcomes;

• Reduces legal risk;

• Creates clarity for everyone involved; and

• Most importantly, it shows your business treats people fairly.

Note: Fair Work Australia has a lot of very useful information and free to use resources such as templates and checklists to further assist you.