HR Management
Performance Improvement Plans: How to Write a PIP That Works
A Performance Improvement Plan (PIP) is one of the most important tools in an employer's HR toolkit. Done well, it gives underperforming employees a fair chance to improve while protecting your business if termination becomes necessary. Done poorly, it can backfire spectacularly at the Fair Work Commission.
What the Law Says
The Fair Work Act does not specifically mention PIPs, but Section 387(e) requires the FWC to consider whether an employee was warned about unsatisfactory performance before dismissal. The FWC has consistently held that:
- Employers should identify the specific performance deficiencies
- Employees must be given a reasonable opportunity to improve
- The employer must provide support and resources to help the employee improve
- Regular feedback and review should occur during the improvement period
- The consequences of not improving must be clearly communicated
A well-structured PIP addresses all of these requirements and creates a documented paper trail that can be relied upon if the matter proceeds to the FWC.
What a PIP Must Include
Specific performance issues
Clearly identify what the employee is not doing well, with specific examples and evidence. Vague statements like "needs to improve attitude" are not sufficient.
Expected standards
Define what "good performance" looks like for each identified issue. Use measurable, observable criteria wherever possible.
Support and resources
Detail what the employer will provide to help the employee improve — training, mentoring, reduced workload, additional supervision, or access to an EAP.
Review timeline
Set a reasonable timeframe (typically 4-12 weeks) with interim check-in dates. The timeframe should allow genuine improvement.
Regular feedback schedule
Schedule weekly or fortnightly check-ins to provide feedback on progress, adjust support if needed, and document the employee's trajectory.
Consequences of not improving
Clearly state that failure to meet the required standards may result in further disciplinary action, up to and including termination of employment.
Common Mistakes and How to Avoid Them
Mistake: Using a PIP as a pretext for a predetermined dismissal
Fix: If the outcome is already decided, the PIP is a sham and the FWC will see through it. Approach the PIP with a genuine intention to help the employee improve.
Mistake: Setting unachievable or unreasonable targets
Fix: PIP objectives must be reasonable and achievable. Setting impossible targets to engineer failure is a common reason PIPs fail at the FWC.
Mistake: Not providing the support promised
Fix: If the PIP commits to training, mentoring, or reduced workload, you must actually provide it. Failing to deliver support undermines the entire process.
Mistake: Not documenting progress and feedback
Fix: Keep written records of every check-in, feedback session, and the employee's progress (or lack thereof). Without documentation, it becomes a he-said-she-said situation.
Mistake: Making the PIP humiliating or punitive
Fix: A PIP should be supportive and constructive, not a public shaming exercise. Handle it confidentially and with respect for the employee's dignity.
Penalties and Consequences
If you dismiss an employee after an inadequate PIP process and they lodge an unfair dismissal claim, you face:
- Compensation of up to 26 weeks' pay (capped at half the high income threshold)
- Reinstatement orders requiring you to re-employ the dismissed worker
- Legal costs for FWC representation, typically $5,000-$20,000+
- Management time lost preparing for and attending conciliation/arbitration
Most unfair dismissal claims settle at conciliation. Having a well-documented PIP process significantly strengthens your negotiating position and reduces likely settlement amounts.
When to Get Professional Help
Consider engaging an HR consultant when you:
- Need to draft a PIP and want to ensure it is legally sound
- Are managing a complex performance issue involving potential disability or mental health considerations
- Want to develop a performance management framework including PIP templates
- The PIP has concluded and you are considering termination
Jordan Firme Business Consultants helps employers develop and implement PIPs that are fair, legally defensible, and genuinely aimed at improving performance.
Frequently Asked Questions
There is no specific legal requirement to use a PIP. However, the Fair Work Commission expects employers to have given employees warnings about unsatisfactory performance and a reasonable opportunity to improve before dismissal. A PIP is the most effective and defensible way to demonstrate this. Without documented performance management, you are at significant risk of an unfair dismissal finding.
A PIP should run for a reasonable period that gives the employee a genuine opportunity to improve. This is typically 4-12 weeks depending on the complexity of the performance issues. A PIP that is too short (e.g., 1 week) may be seen as a sham, while one that is excessively long may be impractical. Consider the nature of the role and the improvements required.
An employee cannot be forced to sign a PIP, but you can require their participation in the process as a reasonable management direction. If they refuse to sign, note their refusal on the document, have a witness present, and continue with the process. Their refusal does not invalidate the PIP — it is evidence they were made aware of the expectations.
If the employee has not met the PIP objectives by the end of the review period, and you have provided genuine support and regular feedback throughout, you have several options: extend the PIP with revised targets, consider redeployment to a more suitable role, issue a final warning, or proceed to termination following proper process. Document your decision and reasoning.
Generally, no. A PIP is designed for performance or capability issues. Misconduct (such as dishonesty, harassment, or policy breaches) should be managed through your disciplinary process, not a PIP. Using a PIP for misconduct can blur the lines and weaken your position if the matter escalates.
An employee cannot claim unfair dismissal simply because they are on a PIP — they have not been dismissed. However, if a PIP is implemented in a way that is harsh, humiliating, or designed to force the employee to resign, it could constitute constructive dismissal or adverse action. PIPs must be genuine, supportive, and fair.
Need Help With a Performance Issue?
Our HR consultants can help you draft a legally sound PIP, manage the process, and advise on next steps if improvement does not occur.
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