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Performance Managing Employees & Mental Health

Reading time: 13 mins

Mental health and performance management are interconnected in many ways. Productivity, team dynamics and attendance are all related to mental health issues. Employees that have issues in these areas may face performance management.

Learning how to performance manage an employee with a mental health condition is a delicate journey. And many managers will have to face this challenge during their working life.

Mental health issues can play a problematic part in an employee’s working life. Approximately 45% of Australians aged between 16 and 85 will experience a mental health disorder during their lifetime. And, in any year, around 20% of Australian adults will experience a mental health disorder.

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If you want to talk to an experienced employment lawyer, contact Prosper Law at 1300 003 077 or email enquiry@prosperlaw.com.au. We are a fixed-fee workplace law firm and help clients across Australia.

How to Performance Manage an Employee with Mental Health Condition

Some of the psychological illnesses that employees may suffer from include mood swings, depression, substance use disorders, bipolar disorders, anxiety disorders, and other common mental illnesses.

In addition, bullying behaviour and harassment related to poor mental health in the workplace may also impact other employees (including those not personally suffering from mental illness).

For employers, this presents a minefield of legal issues.

An employer’s duty of care

Ultimately, employers must provide their employees with a safe place to work. This overriding duty of employers is not limited to providing a workplace that is free from physical harm, but also one that promotes mental health and supports workers suffering from mental health disorders.


What happens when an employee who is suffering from a mental illness is underperforming, either as a consequence of the mental illness or for other reasons? How can Australian employers performance manage employees that are suffering from mental illness?

When employers are faced with any under-performance issue, the best way to manage the problem is to acknowledge it, rather than sweep it under the rug. As with any other issue in the workplace, prevention is always better than cure.

Under-performance issues (irrespective of an underlying mental health issue) may be avoided by ensuring job roles and objectives are made clear to every employee, communication is kept clear between an employee and his or her supervisor, and any performance concerns are addressed casually at an early stage, and appropriate training is provided when necessary.

But there are extra steps that should be taken for employees that are (or are suspected of) suffering from a mental health disorder.

Before You Start a Performance Management Process

Before starting any formal performance management process, the employee should have been provided with regular, casual feedback from their manager.

You want to ensure that by the time the formal performance management process is started, the employee is not taken by surprise and is fully aware of the problem.

If there is an element of surprise on the part of the employee, you may want to reconsider whether the timing is right for a formal performance management process.

How to Performance Manage an Employee with Mental Health Condition

Where regular, casual feedback is given, you need to consider whether the employee may have a mental health disorder. If they do, this will need to play a part in your decision-making and the design of the performance management process.

Performance Managing Employees with Mental Health Issues: What to Do

There are a few things you – as an employer – can do in this situation. The key thing is to demonstrate empathy while balancing the numerous other considerations. When it comes to mental health issues, empathy is an absolute requirement and an employer’s language and conduct should convey this at every stage of the performance management process. Managing the performance of an employee with a mental health disorder is less of a ‘tick box’ process and should instead be thought of as a means of taking care of all employees.

You must explore the probable reasons for poor performance as far as possible, particularly if you already know or suspect a mental health problem.

However, you must take care to investigate whether there is a mental health condition or whether you or someone else is assuming that there is. Be careful to rely on facts, such as an employee telling you that they suffer from a mental health disorder. Alternatively, if the disorder is claimed to be significant, you may want to request medical evidence (but, on this point, you should be careful).

Recognise that, as an employer, you owe a duty of care to all of your employees (including the underperforming employee who may be suffering from a mental illness).

You must allow your employees to disclose any health problems they might be having that are affecting their performance. However, you should keep your discussions focused on work issues only.

Your approach should necessarily be nonjudgmental. You can simply ask your employees if anything is affecting their performance.

If any of your employees disclose a mental health problem, you must consider and agree on a reasonable adjustment and see that it is implemented. Where possible, employers must provide support by making reasonable adjustments before following the formal procedures of performance management.

Consider how the employees’ poor performance may be impacting others.

Think about whether it is in the best interests of the employee that they continue in their role. Alternatively, performance management may cause their mental health issue to deteriorate further.

Consider whether it is in the best interests of the business that the employee continues in their role. For instance, are they able to fulfil the fundamental requirements of the role?

Ensure that policies and procedures are explained clearly to employees so that they know what to expect.

How to Performance Manage an Employee with Mental Health Condition

Performance Managing Employees with Mental Health Issues: What Not to Do

  • Avoid asking intrusive questions or insist that the person disclose his or her mental health issues
  • Refrain from making assumptions about how a mental health issue might affect an employee and try to recognise and address any unconscious bias that there may be towards the issue
  • Do not regard employees with suspicion or make assumptions that the mental health problem or the sickness absence might not be ‘genuine’

The language you use while having performance management conversations can also help in avoiding conflict and demonstrating empathy, sensitivity and understanding towards employees. If you try to tell a person that they “must”, “should”, “need”, or “ought” to do certain things, it can make them defensive. It may be better to use language such as “the role requires X, Y, Z of you”, rather than saying “you must do this”.

Factor the Mental Health Disorder into Your Decision Making

When you need to address poor performance in the workplace and you become aware that the relevant employee has a mental illness, it is crucial for employers to factor any mental illness into their strategy for dealing with the issue.

When faced with this type of scenario, you must consider a series of questions to enable you to determine the best approach.

If you are seeking to performance manage an employee and that employee has or is suspected of having a mental health disorder, consider the following:

  • Is there any diagnosis available?
  • Has your employee been to see a doctor?
  • Were you already aware of the condition before the issue of poor performance arose?
  • Does the condition seem to have either caused or been a contributing factor in the performance issue of your employee?
  • Is your employee making efforts to do something that will help them manage their condition?
  • Have you put in place any measures or provided any support that can help the employee manage the condition as it affects their work? In other words, did you make any reasonable adjustments in order to accommodate the impact of the condition?
  • Should you consider engaging a doctor, workplace rehabilitation provider, or a psychologist to assist with the process?

You need to get the information that will allow you to assess the impact, if any, that the illness is having on the performance of the individual. You also need to consider all possible reasonable adjustments that can be made to assist your employees in their job performance by accommodating their condition.

Performance Manage an Employee with Mental Health Condition

A step-by-step process to performance manage a poor-performing employee with a mental illness

Assuming you have already provided regular, casual feedback and the employee’s performance has not improved, you may seek to progress with formal performance management. At all times you must focus on the performance, not on the mental illness. Instead, the existence of a mental health problem should guide your approach and lead to a process that, overall, is sensitive and empathetic.

Step 1 – Organise a meeting

Arrange a meeting, let them know the purpose of the meeting in advance and offer for them to bring along a support person to the meeting.

Step 2 – lead the meeting

Before we jump in, make sure that someone representing the business is taking notes and accurately recording what is being said.

At the meeting, start by setting out your concerns regarding their performance in detail. Make it clear to them exactly why their level of performance has fallen short and include specific examples.

Inform them that you are aware of or are concerned about any potential underlying mental health issues and (sensitively) ask them if they have been struggling with a mental health issue.

If they confirm that they have a mental illness, make it very clear to them that their existing standard of performance cannot be accepted. However, you are open to exploring any potential and reasonable adjustments that can help them accommodate the impacts of their mental issues. This is so that they can continue to meet the requirements of their position.

Also, make it clear that if the performance issue is not resolved, you might have no choice left but to proceed with a more formalised performance management path. And further that this may lead to termination of employment.

Performance Manage an Employee with Mental Health Condition

If the employee does not confirm that they have a mental illness, advise the employee that you may be unable to take any mental health issues into consideration if they are not open. Encourage open and honest communication and show genuine concern for their wellbeing.

During the meeting, you should work with the employee to develop an action plan. A good way to develop an effective performance management plan is to develop targets that are SMART (specific, measurable, attainable, relevant, and time-based). Using the SMART method will ensure that goals are certain and not vague. If the goals are vague, you are potentially opening the door to an unfair dismissal claim.

It is also vital that the employee participates in this process as they are more likely to follow the plan if they have participated in its development. Alternatively, if they don’t follow the plan, it will be difficult for the employee to argue that the plan was unachievable (again, hint at an unfair dismissal claim) if they participated in its development.

Step 3 – send a follow-up email

Send a follow-up email, preferably straight after the meeting. The email should include the notes taken during the meeting and request the employee read the notes and identify whether there are any concerns or inaccuracies with the notes. It is preferable to ask them to identify if there are inaccuracies, rather than asking them to confirm they agree (because if they don’t, the accuracy of the notes may be called into question).

Step 4 – monitor and assist

A performance management process is ongoing. If you hang your hat after establishing the plan and wait for your employee to fail, you may be headed to Fair Work.

Instead, be as proactive as you expect your employee to be. Ask how they are going, if they have the right tools and equipment to meet the plan, what extra support or training they need, etc. In a performance management process, there is no such thing as too much help.

Step 5 – Check-in

Regularly check in with the employee to see how they are progressing. This casual check-in does not need to be as formal as a performance management meeting.

Step 6 – Final performance management meeting

This meeting should build upon the first meeting. Both the employer and employee should discuss any ongoing issues, support requirements and specific examples of poor and satisfactory performance since the last meeting.

Step 7 – The End of the Process


  1. The employee has met the requirements of the performance management plan; or
  2. The employee’s poor performance has continued and they have been unable to improve their performance to the required standard

If the employee has met the requirements, you may decide to end the formal performance management process and revert to regular, casual feedback and ongoing monitoring.

However, if the performance management process has resulted in an unsatisfactory result, you may decide to terminate the employee’s employment.

It’s important that termination of employment is not pre-determined. An employee must be given an opportunity to put their case forward as to why their employment should not be terminated. Further, the reason for termination must be lawful and clearly explained to the employee.

Although it is not possible to guarantee that a claim for unfair dismissal will not be brought by the employee, you can minimise the risk. This can be done by demonstrating genuine empathy, sensitivity and understanding throughout the process.

The Legal Risks of Failing to Appropriately Performance Manage an Employee with Mental Health Issues

There are legal risks for employers that do not follow a lawful and fair performance management process for employees suffering from a mental illness.

performance manage employee with mental health issue

Those risks include:

  • Breaching work health and safety laws by failing to provide employees with a safe work environment
  • Breaching anti-discrimination laws (at both State and Federal level)
  • Unfairly dismissing an employee or breaching general protections, contrary to the Fair Work Act 2009 (Cth)
  • Breaching a term of the employee’s employment contract
  • Engaging in conduct that is considered to be misleading or deceptive (if the employer conveys that they have a safe work environment and that is untrue), contrary to the Competition and Consumer Act 2010 (Cth)


When faced with performance issues from an employee with a mental health disorder, you must take care to plan, plan and plan (yes – it’s very important!). You must then execute your plan in an empathic way.

This is important not just to avoid a workers’ compensation, discrimination or adverse action claim, but also to represent the business in a responsible way and as a good corporate citizen.

How Can Prosper Law Help?

If your business is seeking to performance manage an employee with a mental health disorder, it is advisable to get professional legal support.

Prosper Law’s experienced workplace lawyers can guide you through the process by giving you the best ideas for dealing with your employee’s performance sensitively and effectively.

Want to read more? Check out our publication Can employers force their employees to be vaccinated against COVID 19?

Farrah Motley | Director

PROSPER LAW – Australia’s Online Law Firm

P: 1300 003 077

E: enquiry@prosperlaw.com.au

W: www.prosperlaw.com.au

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About the Author

Farrah Motley
Director of Prosper Law. Farrah founded Prosper online law firm in 2021. She wanted to create a better way of doing legal work and a better experience for customers of legal services.

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