Performance Management in 2026: Why Employers Need to Prepare for January 2027

Performance management is one of those areas of HR that should be relatively straightforward. Employees need to understand what's expected of them, receive feedback on how they're doing and have opportunities to develop and improve.

In practice, it can become far more complicated.

Over the years, I've seen businesses invest considerable time and money in appraisal systems, performance frameworks and management training. Some have excellent processes on paper, yet managers still struggle to have honest conversations about performance.

With significant changes to unfair dismissal legislation approaching in January 2027, now is a sensible time for employers to look at how they're managing performance, particularly during those early months of employment.

What's changing in January 2027?

From 1st January 2027, the qualifying period for protection against ordinary unfair dismissal will reduce from two years to six months under the Employment Rights Act 2025.

The existing cap on compensatory awards for unfair dismissal will also be removed.

This means employees who have already completed six months' service when the changes take effect will gain protection from ordinary unfair dismissal, including people who joined their employer during the second half of 2026.

Employers will still be able to dismiss employees for fair reasons, including capability, provided they follow a fair process.

It's also worth remembering that employees already have certain protections from their first day of employment, including protection against discrimination and dismissal for automatically unfair reasons.

For businesses, the changes make it even more important to address performance concerns promptly and fairly, rather than allowing them to continue without action.

1. Make better use of probation periods

Probation periods should give employers and employees an opportunity to establish whether the role is working out.

Unfortunately, they can sometimes become little more than an administrative exercise.

A new employee starts, their manager is busy, and before anyone realises it, they're approaching the end of their probation without having received much meaningful feedback.

If there are concerns, these may be raised for the first time at the final review.

That's hardly a fair opportunity for someone to demonstrate improvement.

A more effective approach is to agree clear expectations when someone joins, schedule regular reviews and make sure any concerns are discussed early.

A practical suggestion: Review your probation arrangements now. Consider whether managers have clear review points, understand how to document concerns and know when to seek advice.

The new legislation doesn't introduce a mandatory probation period or prevent employers from having one longer than six months. However, the length of a probation period doesn't remove an employee's statutory rights.

2. Stop relying on annual appraisals

Recent research presented at Gartner's HR Symposium in London found that only 38% of employees say performance management helps them perform in their role.

That's a disappointing statistic when you think about the amount of time many organisations invest in performance reviews.

Annual appraisals can still be useful, particularly when discussing longer-term objectives, development and career progression.

But they're far less effective when they become the main opportunity for employees to receive feedback.

Managers should be having regular conversations throughout the year, recognising good work, discussing areas for improvement and checking whether employees have the resources and support they need.

A brief, meaningful conversation can often achieve more than a lengthy appraisal form completed months after an issue first arose.

3. Understand what's affecting performance

Before deciding how to manage poor performance, it's important to understand what's happening.

Is the employee clear about what's expected? Have they received appropriate training? Is their workload manageable?

There may also be personal circumstances or health-related issues affecting their ability to perform.

For example, someone experiencing menopause symptoms, a disability or a period of poor mental health may need additional support or changes to their working arrangements.

Managers should avoid making assumptions or attempting to diagnose an issue themselves. Instead, they should create an environment where employees feel comfortable raising concerns and know that these will be handled sensitively.

Where an employee has a disability, employers have a legal duty to consider reasonable adjustments.

The objective is to establish what support is appropriate whilst maintaining clear and fair expectations.

4. Give managers the confidence to have difficult conversations

I think this is one of the biggest opportunities for employers.

Most managers don't deliberately avoid dealing with poor performance because they don't care. Often, they're uncomfortable with confrontation, worried about getting things wrong or unsure what they're allowed to say.

So the conversation gets delayed.

Meanwhile, other employees may be picking up additional work, deadlines are being missed and frustration is building.

Managers need practical guidance on how to raise concerns, explain expectations and respond appropriately when an employee challenges their feedback or raises personal circumstances.

This doesn't necessarily require lengthy management courses.

Sometimes a little coaching, access to HR advice and a straightforward conversation framework can make a significant difference.

5. Make performance improvement plans meaningful

There will always be situations where informal support doesn't resolve the problem and a more structured approach is necessary.

A performance improvement plan, often referred to as a PIP, can be a useful tool when applied fairly.

A good plan should explain:

• What aspects of performance need to improve.

• What standard the employee is expected to achieve.

• What training, guidance or support will be provided.

• How progress will be measured and reviewed.

• The reasonable timescale for improvement.

• What may happen if the required improvement isn't achieved.

The employee should understand the concerns and have an opportunity to respond.

Employers should also keep appropriate records of discussions, support offered and progress made.

If improvement isn't achieved, any subsequent decisions must follow a fair procedure. Dismissal should be considered a last resort where appropriate alternatives and support have been explored.

6. Can AI help with performance management?

There's certainly a place for AI in supporting managers, particularly when it comes to preparing for conversations, structuring objectives and thinking through different approaches.

For example, a manager might use an approved AI tool to help them develop a framework for a performance discussion or identify questions they should consider.

However, employers need to be careful about confidentiality and the use of employee information.

Uploading identifiable performance records, health information or other confidential employee data into an unapproved AI tool creates unnecessary risks.

Managers also need to remain responsible for the judgements they make. AI-generated suggestions should be checked carefully and never treated as an objective assessment of an employee's performance.

Before introducing AI into performance management, employers should review their data protection arrangements, internal AI policies and the level of human oversight involved.

In many cases, existing HR systems already provide useful functionality for recording objectives, scheduling reviews and managing performance processes.

It's worth understanding what your current technology can do before introducing additional tools.

What should employers do now?

With January approaching, I'd encourage businesses to review their existing processes and ask a few practical questions.

Are our probation reviews actually happening? Do employees understand what's expected of them? Are managers addressing concerns early enough? Do we have clear processes for managing capability issues, and are we confident that these are being applied fairly?

It's also worth looking at whether managers feel sufficiently supported to have difficult conversations.

Good performance management relies on clear expectations, regular feedback and fair treatment. Having appropriate policies and processes in place gives managers the structure and confidence to put those principles into practice.

How HRnetics can help

At HRnetics, I support small and growing businesses with practical HR advice, process reviews and management support.

If you're unsure whether your performance management or probation arrangements are ready for the upcoming changes, I'm happy to arrange a free 30-minute introductory conversation.

Visit www.hrnetics.co.uk to find out more.