Last reviewed: July 2026
If you run a small business in Stoke-on-Trent and you’ve got someone on your team who isn’t performing, you already know the feeling. It sits in your chest every morning before you walk in. You know the conversation needs to happen, but you don’t know where to start, what you’re legally allowed to do, or whether fixing it is even worth the effort compared to just letting them go.
Here’s the honest answer: in 2026, getting this wrong is more expensive than it has ever been. The Employment Rights Act 2025 is live, the legislative landscape is shifting fast, and the local labour market in Stoke-on-Trent and Staffordshire means replacing the person you dismiss is not the quick fix it might seem. This guide is written to help you get it right, without the jargon.
Why Underperformance Hits Small Businesses in Stoke-on-Trent Harder Than You Think
Small businesses are not a niche. Official DBT data confirms that at the start of 2025, businesses with 0 to 49 employees made up 99.18% of all UK private sector businesses and accounted for 60% of all private sector employment. If you are managing a team of five in Hanley or a crew of twelve in Newcastle-under-Lyme, you are the norm, not the exception. And unlike a corporate with an HR department, you are doing this alone.
The true cost of replacement in a skills-shortage market
The April 2026 Staffordshire and Stoke-on-Trent Economic Bulletin confirms ongoing labour and skills shortages across the region, with a persistent mismatch between available workers and the roles employers need to fill. That context matters enormously when you are deciding whether to dismiss someone.
Dismissal is not a cheap reset. It is a recruitment process in one of the tightest local labour markets in the Midlands. You will advertise, wait, interview, onboard, and spend months getting a new hire up to speed. During all of that, your remaining team carries the load. If your underperformer is salvageable, investing in fixing the problem is almost always the smarter financial call. That reality is no different whether you’re based in Longton, Burslem, or Fenton.
The 2026 legal shift that changes the stakes for every dismissal
The Employment Rights Act 2025 received Royal Assent and is rolling out changes across 2026 and 2027. From April 2026, employees have day-one rights to statutory sick pay and parental leave. The Act itself, published on legislation.gov.uk, sets out the framework for changes to unfair dismissal rights, with the qualifying period due to reduce significantly as commencement regulations are confirmed across 2026 and 2027.
The direction of travel is clear and the government has been explicit: protections for employees are being extended, the qualifying period for unfair dismissal rights is coming down, and the window in which a new hire can bring a claim against you is shrinking fast. ACAS’s guidance on the Employment Rights Act 2025 provides a plain-English summary of what is changing and when. Read it before you make any hiring or dismissal decisions this year.
The practical implication for Stoke SMEs is this: procedural shortcuts that might once have been overlooked now carry real financial risk. The cost of a procedurally flawed dismissal, measured in tribunal time alone, is substantial for a business with no legal team.
Step One: Spot the Real Root Cause Before You Do Anything Else
Before you say a single word to the employee, you need to understand what is actually going on. This is not soft advice. It is the legal and practical foundation for everything that follows.
Is it capability or conduct? Understanding the legal distinction
ACAS is explicit on this: capability and conduct are legally distinct, and they trigger different processes. Capability means the employee lacks the ability, knowledge, or skill to do the job. Conduct means they are choosing not to behave appropriately or follow reasonable instructions. Conflating the two is one of the most common errors small employers make at tribunal, and it can invalidate an otherwise defensible dismissal.
Ask yourself: can they not do it, or will they not do it? The answer determines your entire approach from this point forward.
The hidden reasons: health, mental wellbeing, and circumstance
When I moved from being on the warehouse floor to managing the same team I had worked alongside, I had to learn this quickly: what looks like a performance problem often isn’t. A person who was reliable and switched-on for months can go quiet, start missing targets, and seem disengaged. The instinct is to treat it as laziness or attitude. Often, it is a mental health problem, a difficult situation at home, or a health issue they haven’t felt safe raising with you.
ACAS requires employers to genuinely investigate whether personal or health circumstances are the root cause before any formal process begins. And if the underperformance is connected to a disability, the duty to make reasonable adjustments is a legal requirement, not optional goodwill. Skipping this step is not just unkind. It is a serious tribunal risk.
How to Have the Conversation Without It Becoming a Legal Problem
Managing without an HR department is the reality for most Stoke-on-Trent small business owners. When I was managing a small team at a local industrial supplier, there was no HR advisor to call, no escalation path, and no script. You figure it out, or you get it wrong in front of people you see every day. That weight is real, and ignoring it does not help anyone.
The informal first chat: framing it as help, not discipline
ACAS is clear: employers must try to help someone improve before starting any formal procedure. If you skip straight to formal warnings, you are not just making a legal error. You are destroying any chance of actually fixing the problem.
The frame for the first conversation is not accusatory. It is curious. Something along the lines of: I have noticed some things and I want to understand what is going on so we can work through it together. That is not weakness. That is what good management actually looks like in practice. When you approach it with genuine curiosity and a willingness to listen, you will almost always learn something you did not know, and that information is what determines your next move.
Do not use the word “discipline” in this conversation. ACAS explicitly warns against conflating performance management with the disciplinary process. If the employee later claims you prejudged the outcome, that single word can cost you at tribunal.
Documenting the conversation without sounding like HR
You do not need to produce a ten-page report from an informal chat. You need a brief written record: the date, what you discussed, what you offered in terms of support, and what was agreed as next steps. Email it to yourself and keep a copy somewhere secure. That is it.
This documentation protects you if things escalate. It also demonstrates to the employee that you took the matter seriously and acted in good faith. Tribunals respond well to evidence of a genuine, supported improvement process. They respond badly to employers who can’t demonstrate they did anything before issuing a dismissal.
Building a Performance Improvement Plan That Actually Works and Holds Up at Tribunal
A Performance Improvement Plan (PIP) is not a managed exit document. If you design it as a paper trail to justify a foregone dismissal, a tribunal judge will see it within minutes. A PIP is a genuine, structured offer to help someone succeed. The legal test is whether it was reasonable, achievable, and genuinely supported.
Clear targets and realistic timelines
Good targets are specific and measurable. “Improve your attitude” is not a target. “Achieve X units of output per week by the end of the next four-week review period” is. Be specific, give the person a genuine chance to hit the target, and schedule a review date at the outset.
The timeline should reflect the complexity of what you are asking. If someone needs to develop a new skill, four weeks is probably not enough. Eight to twelve weeks is often more defensible, and it also gives the improvement genuine room to happen.
Using Stoke-on-Trent’s free upskilling resources
This is where Stoke-on-Trent SMEs have a concrete advantage that most generic UK guides completely ignore. The Stoke-on-Trent and Staffordshire Growth Hub provides free business support, including people management guidance and signposting to funded training programmes for SME employees. If the underperformance is capability-based, this is the first call to make. It is free, it is local, and it is exactly what the Growth Hub exists for.
If you have a person who simply lacks a skill or confidence, investing in their development is cheaper than replacing them. It also sends a signal to your wider team: you do not discard people at the first sign of struggle. That matters for retention and culture, and both of those matter for your bottom line.
When Enough Is Enough: The Legal Steps to Formal Action and Fair Dismissal in 2026
Sometimes informal support and a PIP are not enough. The person does not improve, does not engage, or the behaviour continues. When that happens, you move to a formal capability process. This is not optional, and the sequence matters.
Moving from informal support to formal capability procedure
ACAS confirms that dismissal must always be a last resort. Before you reach it, you must have followed a formal capability hearing process: the employee must be invited in writing, told of the evidence against them, given the right to be accompanied, and given a genuine right of appeal after any decision.
None of this is complicated in a small business. But it must be done. The fact that you have three employees and no HR department does not exempt you from following a fair procedure. Tribunals apply the same standard regardless of your headcount.
The ACAS Code of Practice and why your own procedure matters
If you have a staff handbook or employment contracts with a stated disciplinary or capability procedure, you must follow it. Failure to follow your own documented process is grounds for an unfair dismissal claim even if the underlying decision to dismiss was reasonable. This catches more small employers than almost anything else.
If you do not have a documented procedure, ACAS provides a free Code of Practice that sets the legal minimum standard. Use it. ACAS also offers free e-learning on performance management and a free helpline. There is no excuse for not knowing the process when the resources to learn it cost nothing.
What happens if a PIP fails
If a PIP fails after a genuine, supported, documented effort, dismissal on capability grounds is legally defensible. The key word is genuine. You have to demonstrate: clear targets were set, reasonable support was offered, regular reviews were held, and the decision to dismiss was reached after proper consideration of all the circumstances.
With the Employment Rights Act 2025 rolling out changes to qualifying periods across 2026 and 2027, the window in which employees can bring unfair dismissal claims is narrowing. Procedural rigour is not optional for Stoke SMEs. It is the cost of employing people under the current law.
Where to Get Help in Stoke-on-Trent
Start with ACAS’s free performance management guidance before you take any formal step. It is written in plain English and covers every stage from informal conversation through to dismissal. The free ACAS helpline is also available if you need to talk a specific situation through.
For local support, the Stoke-on-Trent and Staffordshire Growth Hub is the right first call for businesses in this area. They can point you toward funded training if capability is the root cause, and their support is free and aimed squarely at SMEs in Staffordshire. You can also find a summary of the key employment law changes coming into effect via the government’s business employment changes hub, which is worth bookmarking if you want to stay current without wading through primary legislation.
One final point on the wider picture. Managing a performance process properly takes time, and that time comes from somewhere. For most Stoke SME owners, it comes from the parts of the business that already feel stretched. One of the most practical ways to create headroom in your operation is to identify the repetitive admin and manual processes that eat owner-time every week and automate them. When that overhead is handled, you have more capacity to manage people well rather than reactively. That is the kind of work I do at Wright Advisory: finding where AI systems can cut cost or lift output in a specific Staffordshire business, building those systems against your own data and processes, and optimising them over time. If that sounds like a useful conversation for your business, book a free discovery call. No jargon, no hype. Just a practical look at what is possible for your operation.
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