Managing a business with staff is much like managing a garden. When the sun shines and everything is doing what it should everyone is happy.

But much as with garden plants sometimes an employee is in the wrong position or has reached the limit of their capabilities and hard decisions need to be taken about what, if any, further resources can be put to that individual or whether the time has come to remove the employee from their post and put in a more suitable candidate.

It is essential that this process is handled carefully and sympathetically not only to avoid legal consequences but for the benefit of your workforce knowing that you are a fair and reasonable employer.

There are six potentially fair reasons to dismiss an employee. These are:

• A reason relating to the employee's capability or qualifications for performing work of the kind they were employed to do
• A reason relating to the conduct of the employee
• Retirement of the employee, although this will cease to be a reason in its own right subject to the transitional provisions from April 6 2011
• The employee is redundant
• The employee could not continue to work in the position he/she held without contravention of a duty or restriction imposed by or under an enactment
• For some other substantial reason of a kind to justify the dismissal of an employee holding the position which the employee held.

Even if the employer has a potentially fair reason for dismissing the employee they must still follow an appropriate procedure before deciding whether to dismiss.

Most employers are now familiar with disciplinary and grievance procedures but it is always worthwhile reminding yourself of the provisions of the ACAS Code of Practice. Failure to comply with his can lead to a finding of unfair dismissal and the Tribunal can increase compensation by up to 25 per cent.

The key for any employer is to act reasonably throughout the process. If an employee is not meeting performance targets then the employer should be seen to give an employee the ability and time to improve before seeking to dismiss.

Common pitfalls that employers fall into are:

• Failure to follow any internal disciplinary procedures that they have and seeking to do things which constitute a breach of contract. If an employer breaches a contract then they could lose the benefit of other contractual rights that they would want to rely on, such as post-employment restrictions preventing an employee working for a competitor.
• Claiming that a dismissal is for a reason other than the real one. It is common for employers to seek to claim that employees are redundant rather than to manage them out for poor performance. Although employers often do this with the best of intentions it is likely to be exposed in any subsequent Tribunal hearing and will not reflect well.
• Sidelining employees to put them in a position where they feel forced to leave. If an employee can demonstrate that they resigned because of such actions they may have a claim for constructive dismissal. Similarly telling an employee that unless they resign they will be disciplined could again amount to constructive dismissal.
• It is a common mistake for an employer dealing with a fixed term contract to simply believe that upon expiry of that fixed term contract they need to do nothing. The expiry of the fixed term contract is still a termination and an employer will still need a fair reason and a fair procedure to be undergone at the end of that employment.

Failure to follow the correct procedure or to give adequate notice can result in a claim for unfair and/or wrongful dismissal.

Damages for such a claim can sometimes be substantial especially in the current economic climate where employees may not be able to mitigate their loss as readily as once was the case. Regardless of whether the claim succeeds, the cost of defending it can be substantial, not just legally but also in terms of management time.

• Amanda Finn is head of Employment Law at Gullands. She can be reached by email: a.finn@gullands.com . Visit www.gullands.com for further information.