[Direct answer]It's not allowed to dismiss an employee directly. To terminate the employment contract on the grounds of incompetence, the employer must follow three legal procedures: first, prove that the employee is incompetent (with clear assessment standards and quantifiable results); then provide training or transfer the employee to a different position; and only if the employee remains incompetent after the adjustment can the employer terminate the contract and pay economic compensation. Skipping any of the intermediate steps and dismissing the employee directly constitutes an illegal termination, for which the employer must pay double the amount of economic compensation as compensation.

1. Problem background and typical scenarios

The typical path dependence of companies in dismissing employees who "perform poorly": When the leader deems them unsuitable, HR issues a termination notice; those who rank at the bottom of the evaluation are directly dismissed; "last-place elimination" is treated as a legal tool; after verbally negotiating with the employee, they are asked to sign a "consensual termination agreement", but the actual procedural rights and benefits are reduced. The employees' mirror-image confusion: When they are told "they lack competence", what exactly constitutes legal incompetence?

II. Key points of contention

First, the standard of proof of incompetence. The job responsibilities must be clear, the assessment system must be subject to democratic procedures and public announcement, and the assessment results must be objective and quantifiable. All three conditions are indispensable; "what the leader thinks" is not evidence. Second, the completion of the training or job transfer procedures. According to legal requirements, either training or adjustment of the job position must be actually carried out. Notifications stating "training has been provided" but not actually happening are invalid. Third, the second proof of incompetence. If the employee is still unable to perform the job after adjustment, there must be new evidence of the assessment. Using old evidence to terminate the employment is not allowed. Fourth, the determination of the last-place elimination. Being ranked last does not necessarily mean being incompetent. Directly terminating the employment of those ranked last is generally considered illegal.

III. Professional analysis by Henglue Lawyers

The three-step procedure for terminating an employee for incompetence is a battlefield of evidence gathering at every stage. **Step 1: Proving Incompetence** The position description or performance evaluation system must first exist and comply with legal requirements. The system must be established through democratic procedures (e.g., employee representative meetings or collective discussions), publicly disclosed to employees (with signed records, training records, and system confirmation), align with job responsibilities, and allow quantifiable assessment. Employees must be given the opportunity to confirm or contest the results, as unilateral internal scoring carries low evidentiary weight. In practice, most legal disputes stem not from flawed assessment results but from the system failing to undergo democratic procedures or public disclosure—if employees argue "I never saw this system," the entire assessment chain collapses. **Step 2: Implementing Training or Job Redeployment** The legal definition requires either "training" or "job redeployment," with either option sufficient. Training must include notifications, attendance records, and aligned assessment criteria, while job redeployment must be documented in writing and demonstrate reasonableness (related to competency gaps, not punitive marginalization). This step aims to give employees an opportunity to improve and establish the procedural basis for subsequent incompetence determinations. **Step 3: Second Incompetence Determination and Termination** After adjustments, conduct another assessment using the same standards. If incompetence persists, provide 30-day written notice or pay compensation equivalent to two months' salary, followed by termination. Failure to follow any step results in illegal termination, triggering double compensation and the right to restore employment. **Employee Strategy**: Upon receiving an "incompetence" notice, first request the assessment basis—system documents, results, and scoring details. Challenge unpublished systems or subjective evaluations through written objections and evidence preservation. Monitor written notifications during training/redeployment processes and promptly object to unreasonable redeployments (e.g., fundamentally incompatible roles or salary cuts). Within the one-year arbitration period, assert illegal termination compensation or demand continued employment, securing the trio of evidence (contract, pay slips, termination notice). **Company Compliance Recommendations**: Publicly display and archive assessment systems, document evaluation processes (communication records, improvement plans), and preserve procedural records. The cost of incompetence termination far outweighs routine performance management investments—proactive system design pays off. Beijing arbitration courts and courts strictly review incompetence terminations, with high employer loss rates reflecting procedural completeness as the sole variable.

IV. Practical suggestions and legal basis

The first step is to prioritize systems: the assessment system follows democratic procedures and public announcement and signature acceptance, with one standard for each position. The second step involves a three-step process: proving incompetence, providing training or transferring to another position, and terminating the employment after a second assessment, with gradual documentation of the process. The third step focuses on employee responses: requesting the assessment basis, raising written objections, and exercising rights within the statute of limitations. The fourth step evaluates legal pathways: calculating compensation for unlawful termination and weighing the pros and cons of requests for continued performance. The main legal basis includes Article 40 (non-fault dismissal), Article 46 (economic compensation), and Articles 48 and 87 (unlawful termination) of the Labor Contract Law of the People's Republic of China (amended in 2012); the Judicial Interpretation of the Supreme People's Court on the Trial of Labor Dispute Cases; and specific applications shall be subject to the currently effective regulations.

5. Henglu Law Firm's Advice

There's no shortcut to dismissing an employee for incompetence. Failure to follow any of the three-step procedures will result in defeat: failure to publicize the system, formalistic training, and lack of a second assessment. Any of these issues can turn a "competence problem" into a "financial loss for the company". The same three steps also serve as a protective shield for employees - any place where the procedures are skipped is your advantage. For issues involving termination procedures and labor disputes, you can seek legal assistance throughLabor arbitration and work-related injury compensationYou can refer to the overall solution for services, which involves compliance with the performance evaluation systemBusiness and contract disputes in enterprisesFor the plate, we need a long-term legal advisor to assist with the implementation of the system and the employee health check, which can be referred to for referenceIntellectual property protection and corporate lawFor plates involving the calculation of economic compensation, you can combine them together.Specialised legal servicesPlate consultation.

VI. Frequently Asked Questions

Q1: Is being at the bottom of the evaluation considered incompetent?

Not necessarily. Being at the bottom of the rankings doesn't necessarily mean that one is incompetent. It also depends on the legitimacy of the system and the objectivity of the assessment criteria.

Q2: Can a transfer to a new position result in a pay cut?

It is not allowed to unilaterally reduce salaries. The review of the reasonableness of job transfer includes the matching of salary and position, and employees can raise written objections.

Q3: Can the company just compensate according to the N+1 rule?

Only in the case of lawful termination shall the employer pay the notice period compensation according to the provisions of Article N (or Article N+1) of the Labor Contract Law. For unlawful termination, the employer shall pay double compensation. The compensation method shall depend on the completeness of the termination procedures.

Q4: How long can I wait to file an arbitration case after being dismissed?

Apply within one year, and fix the evidence of the termination notice, salary records, and labor contracts first.

Q5: Can I get compensation if I don't want to go back to work?

The employee can choose between compensation for illegal termination and continued performance of the contract. If the employee does not wish to resume the contract, they can claim compensation instead.

The above questions and answers are mainly based on the judicial practice in Beijing. There may be differences in the adjudicative opinions in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Labor arbitration legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In case of disputes, please consult a practicing lawyer in time.