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Last updated: 23 August 2002

Performance management

Note: This document has not been updated to reflect changes that may flow from the WorkChoices legislation enacted on 27 March 2006

Foreword

This booklet is part of a series of guides issued by the Australian Public Service Commission (the Commission), following the passage of the Public Service Act 1999 (PS Act).

Since the passage of the PS Act, the Commission has published seven guides in the three series: Working with the Act, Working Together, and Values and Conduct .

From now, all Commission guides and advices will be published in this new series, commencing with the title Outsourcing .

To help keep track of how many guides exist, the first booklet on Outsourcing will be numbered no. 8. The earlier guides will be listed in sequence and given a number inside the front cover of all new booklets and, as they are reprinted or revised, will be renumbered into the new series as nos. 1-7.

Under the PS Act, responsibility for employment decisions has generally been devolved to Agency Heads, giving them greater flexibility to manage their own workplaces, within the framework of the Act and subordinate legislation.

This booklet provides advice and guidance to Agency Heads, human resource practitioners and agency staff more generally on performance management. It sets out the basic requirements of the legislation and policy framework which agencies must observe and around which they should establish appropriate agencyspecific performance management arrangements.

 

Andrew Podger
Public Service Commissioner

June 2002

Introduction

The APS Values, established under the Public Service Act provide, among other things, that capability and effective performance are central to the management of the APS-by ensuring the APS focuses on achieving results and managing performance.

As a generic term, performance management is considered to be the effective use of inter-related strategies and activities to improve the performance of individuals, teams and organisations. An effective performance management approach would integrate and align organisational, business and individual planning and performance. It would also provide a means to recognise and reward good performance and to manage underperformance of staff.

The Management Advisory Committee in its 2001 report Performance Management in the APS-A Strategic Framework viewed performance management as a fundamentally important tool that can assist APS agencies to improve organisational capability, meet broad organisational objectives and deliver high quality policy advice and program administration. The report recognised the diverse nature of APS agencies serving government and acknowledged that approaches to performance management must be tailored to the specific business requirements of each agency within the legislative and policy framework.

Performance management is relevant in all APS agencies- regardless of the nature of business activities-and at all levels of the APS.

1. The legislative and policy framework relating to performance management

The Australian Public Service (APS) legislative and policy framework incorporates a number of elements in relation to performance management, notably the PS Act and the government's Policy Parameters for Agreement Making in the APS, April 2000 (Policy Parameters). Under this framework, APS agencies are required to have in place an effective performance management system and salary movement guided by such a system. Although not specifically required by this framework, an effective performance management system would also include provisions that apply to the management of underperformance.

This booklet outlines the relevant provisions of the legislative and policy framework and the management of underperformance.

The Commission is responsible for providing policy and good practice advice to APS agencies on effective performance management and for monitoring the application of the PS Act.

The Department of Employment and Workplace Relations (DEWR) is responsible for the policy parameters and for providing advice on Certified Agreements (CAs) and Australian Workplace Agreements (AWAs) under the Workplace Relations Act 1996 (WR Act), including performance-linked remuneration.

1 . 1 An effective performance management system

The requirement for an effective performance management system derives from the APS Values spelt out in section 10(1) of the PS Act ¹ .

Agency Heads are required to uphold and promote all of the APS Values (section 12) and comply with the Code of Conduct (section 14). In addition, SES employees, by personal example and other appropriate means, are required to promote the APS Values and compliance with the Code of Conduct (section 35(2)(c)). Likewise, APS employees generally must at all times behave in a way that upholds the APS Values and comply with APS Code of Conduct (Section 13).

Achieving results and managing performance

Agency approaches to performance management need to be consistent with the APS Values as a whole. One of the APS Values, however, specifically requires the APS to be focused on achieving results and managing performance (section 10(1)(k)).

There are no prescriptive rules about how this performance focus is to be achieved in individual agencies. However, minimum standards are set out in the Public Service Commissioner's Directions 1999 (Directions).

Public Service Commissioner's Directions

The Directions, issued under section 11, outline the minimum standards that Agency Heads andAPS employees must meet in upholding and incorporating the APS Values.

Direction 2.12 relates specifically to the Value dealing with achieving results and managing performance. The direction is set out in full at Appendix 1, as amended by the Public Service Commissioner's Amendment Directions 2000 (No.1) .

Under this direction, (clauses (1)(a),(b),(c),(d) and (e)), Agency Heads must put in place measures to ensure that the agency:

• has the organisational capacity, flexibility and responsiveness necessary to achieve the outcomes expected
• has a culture of achievement, planning time and priorities to deliver on intended results
• reports on the effectiveness of the agency's outputs
• can demonstrate resource priorities to match agreed outcomes, and
• establishes, and conducts, a fair and open performance management system that:
  • covers all APS employees (SES and non-SES, ongoing and non-ongoing)
  • guides salary movement and is linked to agency organisational and business goals and the maintenance of the APS Values, and
  • provides each APS employee with a clear statement of performance expectations and an opportunity to comment on those expectations.

The direction also requires APS employees, taking into account their duties and responsibilities, to facilitate and participate in the agency's performance management system and to assist the agency achieve organisation goals and the outcomes expected by government (clauses (2)(a), (b) and (c)).

Requirements for review of employment decisions

If employees have any concerns about the process and/or outcomes of performance management systems, employees may seek a review through agencies review mechanisms (Public Service Regulations Part 5).

Employees also have access to independent review of employment actions, including those relating to performance management, by the Merit Protection Commissioner, except where the action consists of termination of employment. Termination of employment is covered in more detail in section 2.2 Responding to Underperformance.

Probation

Employees undergoing a period of probation are generally not subject to performance management systems described in this booklet. More detail about probation will appear in a booklet on probation.

Integrated performance management framework

Meeting the requirements for an effective performance management system will be assisted by implementation of an approach that integrates organisational, business and individual planning and performance, including:

• planning and clarifying performance objectives and linking individual and business plans with organisational plans
• regular feedback on performance and appraisal of individual and team performance against the achievement of objectives
• recognition and reward for performance
• counselling and effective management of poor performance
• learning and development to build individual and organisational capability
• evaluating the contribution of individual and organisational performance.

Certified Agreements and Australian Workplace Agreements

Agencies generally include elements of their performance management system in their CAs or AWAs, particularly those relating to remuneration. It is up to agencies to determine the level of detail included in their agreements. Such agreements have legal force and, as a result, the processes and requirements included in them must be consistently followed.

1 . 2 Salary movement to be guided by performance

As noted in 1.1, under direction 2.12(1)(e)(ii) an agency's fair and open performance management system must guide salary movement. This legislative requirement is reinforced by the policy parameters.

Policy Parameters for Agreement Making in the APS

The policy parameters provide the Government's broad policy framework for agreement making through CAs and AWAs. The policy parameters are set out at Appendix 2.

Policy parameter 5 states that CAs and AWAs are to facilitate mobility and maintain a cohesive APS by:

• maintaining the APS classification structure (with the ability to broadband it further), or an authorised agency structure, with effective performance management arrangements to guide salary movement; and
• retaining portability of accrued paid leave entitlements, with future entitlements being those of the receiving agency.

Within these policy parameters, agencies are free to develop as part of their CAs and AWAs a tailored approach to performance management that links salary movement to an assessment of employee performance-termed performance-linked remuneration.

Performance-linked remuneration

A variety of approaches to performance-linked remuneration is available to agencies, generally based on:

• performance-linked advancement-a base salary increase for satisfactory or higher performance, usually in terms of either incremental progression through pay points or through a percentage increase, and/or
• performance-linked bonus-usually a one-off bonus payment in recognition of higher than satisfactory performance.

Although some confusion has arisen from the interchangeable use of terminology, the term performance pay has increasingly been used for either a performance bonus or a system of proportional increases in base salary for higher than satisfactory performance. Remuneration systems that link the full base salary increase to the attainment of satisfactory performance are seen as performance-linked remuneration, but are not generally viewed as performance pay.

To design an effective remuneration model that meets the legislative and policy requirements, agencies need to ensure that decisions about employees' eligibility for performance-linked remuneration are fair and objective, based on an assessment of employees' work performance and made in accordance with the APS Values and without discrimination patronage or favouritism (section 17(1)).

Requirements for Annual Reports

Under the Requirements for Annual Reports issued by the Department of the Prime Minister and Cabinet in June 2002, agencies must report on the outcomes of their performance pay systems. Annual reports must include information on:

• the number of APS employees at each classification level who received performance pay
• the aggregated amount of such performance payments at each classification level
• the average bonus payments and the range of such payments at each classification level
• the aggregate bonus payment for the agency as a whole.

The guidelines also state that a lesser disaggregation should be used where required to ensure that payments to individuals cannot be identified.

2. Managing underperformance

As part of an effective approach to managing performance, Agency Heads should have in place specific procedures for assessing and resolving underperformance.

There are no specific legislative requirements in the PS Act and subordinate legislation relating to the nature of these arrangements. However, as stated in section 1.1, Agency Heads and APS employees must at all times behave in ways that are consistent with the APS Values and comply with the Code of Conduct.

2 . 1 Procedures for assessing and resolving underperformance

Regardless of whether the agency chooses to include its procedures in corporate policy documents or agency agreements, it is important that the procedures are clearly stated and understood by employees. Most agencies, however, will have included relevant provisions in their CAs or AWAs and, as a result, these provisions will have binding force and must be followed in the handling of particular cases. The APS Commission has developed a set of example clauses that may assist agencies when developing procedures for inclusion in their agreements. They are available on the Commission's website and are reproduced at Appendix 3.

While the processes in place will vary depending on the culture and circumstances of the particular agency, it is important, however, that the procedures:

• are an integral part of a culture of active performance management
• have regard to procedural fairness
• balance the needs of the agency and the employee
• are streamlined and efficient
• are consistent with relevant legislation, including that relating to workplace relations, discrimination, record keeping and privacy.

2 . 2 Responding to underperformance

In cases where unsatisfactory performance is determined, the PS Act includes two provisions which are relevant. The provisions are:

• section 29 relating to termination of employment
• section 23 relating to reduction in classification

Where termination of employment is a likely outcome, agencies need to take account of the unfair dismissal provisions of the WR Act and the case law that has developed through decisions of the Australian Industrial Relations Commission (AIRC) and the Federal Court.

Section 170CG(3) of the WR Act sets out the factors to which the AIRC must have regard when considering whether a termination has been harsh, unjust or unreasonable:

1. whether there was a valid reason for the termination related to the capacity or conduct of the employee or to the operational requirements of the employer's undertaking, establishment or service; and
2. whether the employee was notified of that reason; and
3. whether the employee was given an opportunity to respond to any reason related to the capacity or conduct of the employee; and
4. if the termination related to unsatisfactory performance by the employee-whether the employee had been warned about that unsatisfactory performance before the termination; and
   da) the degree to which the size of the employer's undertaking, establishment or service would be likely to impact on the procedures followed in effecting the termination; and
   db) the degree to which the absence of dedicated human resource management specialists or expertise in the undertaking, establishment or service would be likely to impact on the procedures followed in effecting the termination; and
5. any other matters that the Commission considers relevant.

Experience from AIRC decisions in individual cases suggests that the following key steps should be observed:

• Clear job description/performance agreement -ensure that the employee has a copy of the current job documentation and that he or she understands the standards of work performance that are expected.
• Adequate training -ensure that the employee has received appropriate training and assistance to perform his or her duties.
• Counselling -employees must be given an opportunity to respond to allegations of continuing poor performance. Ensure that the employee is given feedback on performance against the agreed standards, being especially clear about the areas where performance is below the standard expected and that goals for improvement have been set and are monitored over an agreed period.
• Written records of counselling -ensure that there are clear, accurate and relevant written records of discussions with the employee about work performance difficulties.

The employee must be given the opportunity to provide comment.

• Other possible factors -ensure that an attempt has been made to identify the possible causes of poor performance, such as medical problems and personal difficulties and that the employee has been given appropriate opportunities to deal with these difficulties.
• Formal warning -ensure that a formal warning is issued and that the work standards and performance difficulties detailed in the warning are consistent with those raised with the employee during counselling. Ensure that he or she has had the opportunity to respond to the warning, before termination or other formal action is taken.
• Follow the procedures -where there are established procedures in the organisation for dealing with underperformance, which may lead to termination of employment, for example in a Certified Agreement or Australian Workplace Agreement, ensure that they are followed.

Cases of underperformance may arise where there is also a suspected breach of the APS Code of Conduct. It is important for agencies to determine the appropriate procedure to follow when managing the individual case, particularly where termination of employment may be the outcome.

Further guidance on managing underperformance is contained in the Working with the Act series booklet on Managing Breaches of the APS Code of Conduct . The booklet on Counselling For Better Work Performance in the Working Together series is also relevant.

Assistance by the Commission

The Commission is available to provide advice and assistance to agencies on establishing an effective approach to performance management and managing underperformance. Please contact the Commission helpline on 02 6202 3859 or refer to the Commission website.

The Department of Employment and Workplace Relations is available to provide advice and assistance to agencies on agreement making and performance-linked remuneration on (02) 6121 6000 or refer to the DEWR website on www.dewr.gov.au

Appendix 1

Public Service Commissioner's Direction 2 . 1 2

2 . 1 2 The APS focuses on achieving results and managing performance (Act S 10(1)(k))

1. In upholding and promoting the APS Value mentioned in paragraph 10 (1) (k) of the Act, an Agency Head must, in addition to having regard to any statutory accountability and reporting responsibilities, put in place measures in the Agency directed at ensuring that:
   1. the Agency has at all times the organisational capacity, flexibility and responsiveness necessary to achieve the outcomes expected by the Government or any other authority to which the Agency is accountable; and
   2. the Agency has at all times a culture of achievement, planning time and priorities to deliver on intended results; and
   3. the Agency's reporting arrangements provide an account of the effectiveness of the Agency's outputs during the reporting period; and
   4. the Agency is able to demonstrate that it has directed its resource priorities toward the achievement of the outcomes expected by the Government or any other authority to which the Agency is accountable; and
   5. the Agency establishes a fair and open performance management system that:
      1. covers all APS employees; and
      2. guides salary movement and is linked to Agency organisational and business goals and the maintenance of the APS Values; and
      3. provides each APS employee with a clear statement of performance expectations and an opportunity to comment on those expectations; and
   6. the Agency conducts its performance management system in accordance with the objectives mentioned in paragraph (e).
2. In upholding the APS Value mentioned in paragraph 10 (1) (k) of the Act, an APS employee must, taking into account the employee's duties and responsibilities in an Agency:
   1. help to ensure that:
      1. the Agency has at all times the organisational capacity, flexibility and responsiveness necessary to achieve the outcomes expected by the Government; and
      2. the Agency has at all times a culture of achievement, planning time and priorities to deliver on intended results; and
      3. the Agency's reporting arrangements provide an account of the effectiveness of the Agency's outputs during the reporting period; and (iv) the Agency is able to demonstrate that it has directed its resource priorities toward the achievement of the outcomes expected by the Government; and
   2. facilitate a fair and open performance management system in the Agency that:
      1. covers all APS employees; and
      2. guides salary movement and is linked to Agency organisational and business goals and the maintenance of the APS Values; and
      3. provides each APS employee with a clear statement of performance expectations and an opportunity to comment on those expectations; and
   3. participate in the Agency's performance management system in accordance with the objectives mentioned in paragraph (b).

Appendix 2

Policy Parameters for agreement making in the APS, April 2002

Agreement making in the APS will be subject to the following Policy Parameters. Agency Heads will be responsible for ensuring that their agreements are consistent with them. The Parameters apply to both AWAs and certified agreements, unless otherwise indicated.

Government policy objectives for agreement making

Agencies are responsible for managing relations with their employees consistent with the Workplace Relations Act 1996 (WR Act).

Certified agreements and AWAs are to:

1. be consistent with the Government's workplace relations policy, including:
   • fostering more direct relations between employers and employees;
   • protecting freedom of association and securing appropriate right of entry;
   • not limiting future agreement making options;
   • providing, within certified agreements, for comprehensive AWAs to be made with staff; and
   • being comprehensive agreements (at a minimum, by displacing existing agreements and wherever possible, awards).
2. be consistent with the Government's APS remuneration policy that improvements to pay and conditions be linked to productivity gains and not to changes in general taxation arrangements.
3. be funded from within agency appropriations.
4. provide for access to compulsory redeployment, reduction and retrenchment and ensure that:
   • any revision to redundancy provisions, including in an AWA, is not an enhancement of the existing redundancy obligations applying to an agency; and
   • any separate financial incentives to resolve major organisational change are to be cost neutral to the agency in the context of that change and subject to the approval of the Agency Minister, in consultation with the Public Service Minister.
5. facilitate mobility and maintain a cohesive APS by:
   • maintaining the APS classification structure (with the ability to broadband it further), or an authorised agency structure, with effective performance management arrangements to guide salary movement; and
   • retaining portability of accrued paid leave entitlements, with future entitlements being those of the receiving agency.

Government approval requirements for certified agreements

Agencies are to:

• provide to the Department of Employment, Workplace Relations and Small Business (DEWRSB) their draft certified agreement and their assessment of it against the Government's policy objectives; and
• in seeking his/her approval of the agreement, advise the Agency Minister of any policy issues identified by DEWRSB.

Appendix 3

Example clauses relating to management of unsatisfactory performance

• These procedures do not apply to employees who are subject to a period of probation, during the probationary period.
• These procedures do not apply to non-ongoing employees.
• These procedures do not apply in cases of suspected breaches of the Code of Conduct or where there is a health-related reason for the unsatisfactory performance or where an essential qualification has been lost.
• When an unsatisfactory performance process commences, the performance appraisal cycle will be suspended until the process is complete. Where performance is found to be satisfactory, a date will be determined from which the appraisal/advancement cycle recommences.
• Where these procedures result in termination of employment, the provisions elsewhere in the Agreement relating to rights and remedies in relation to termination of employment are applicable.

Procedures

1. After a reasonable period of counselling and coaching, an employee whose performance appears to be unsatisfactory will be issued with a formal warning. The formal warning will set out:
   • details of the required standards for the duties the employee has been assigned and how the employee has failed to meet those standards
   • details of how the employee's performance will be assessed
   • the possible consequences if the employee has not attained and sustained the required standards by the end of the assessment period.
2. A person nominated by the Agency Head will then conduct a fair and impartial assessment of the employee's work performance over an agreed period of time (this should normally be not less than one month and not longer than 3 months). The employee will be provided with feedback on his or her performance during the assessment period.
3. At the end of the assessment period, if the employee's work performance is assessed as meeting the required standard, the assessor will report this finding to the decision-maker. If the decision-maker agrees with the finding, the employee will be advised of this and no further action need be taken under these provisions
4. If the employee is assessed as not having met the required standard, the assessor will report this finding to the decision-maker. The decision-maker will advise the employee of the finding and of the action that he or she proposes to take, which may include one or more of the following:
   • termination of employment
   • reduction in classification
   • reassignment of duties
   • some other appropriate action. The employee will be given 7 days from the receipt of the advice to respond to the findings and the action proposed by the decision-maker.

   The decision-maker, having taken into account the assessor's findings and the employee's response, will advise the employee in writing of his or her decision and the action to be taken.

 

1 All references to parts of legislation are to the Public Service Act 1999 , unless specified otherwise.

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