Lakitu, this puts a different perspective on it, if she is not performing. Do you have a capability policy as part of your organisational policies (which will now apply to her in the new organisation)? We do (I work in the public sector), and the situation you describe would be dealt with under that. You would have to have a meeting with the person, describe how she is not meeting her job objectives (presumably she had objectives in her last year's appraisal?) then look to see how she could be developed and supported to help her raise her game. You then review every month, and only if she doesn't come up to scratch can you do anything about demotion on the grounds of incapacity. It can be a long slow process if you want to go down that route - and things may apply differently in a privately owned company, I don't know.