How to Implement a Performance Improvement Plan for Employees

There is nothing more frustrating to an employer than being prevented from achieving your business goals because of underperforming or misbehaving employees.  Although the law recognises that sometimes management actions need to be taken with employees to deal with poor performance and misconduct, if you haven’t given the employee a warning or a fair chance to improve their performance or behaviour, then you may leave yourself open to a claim of unfair dismissal or unlawful termination. For SMEs, this can also be a huge distraction and can cause you to spend more time dealing with employee issues than working in your business.

Poor performance is a consistent failure on the part of an employee to complete their work to the required standard. It might involve failing to reach work targets, producing inaccurate or sloppy work, or missing deadlines. Employee misconduct on the other hand is deliberate or reckless misbehaviour by the employee that might involve an employee breaching the staff Code of Conduct, failing to follow a reasonable direction, being dishonest or bullying other employees.

It is a rare employer these days that does not have to deal with these issues, and unless you have sound performance and conduct management strategies in place before any poor performance or misconduct arises, you may find your options to deal with these issues is very limited.

What is a Performance Improvement Plan? 

A Performance Improvement Plan (PIP) is a tool employers use to deal with an employee’s poor performance or misconduct.  It is usually implemented after you have had a formal counselling meeting with the employee in question at which the relevant performance or misconduct issues are discussed.  Simply put, PIP is a document that sets out what the problem is with your employee’s performance and what they can to do improve it. 

The actions or behaviour that can be addressed by a PIP may be specific job performance issues or behaviour-related concerns.  When implementing a PIP, employers must bear in mind:

• The purpose of a PIP is to support an employee and to assist their performance improvement.  It is not the first step towards removing them from your organisation.
• A PIP should be implemented after the employer takes positive action to understand what has caused the underperformance or poor performance by an employee.
• A PIP should be part of an overall performance system that minimises the chances of underperformance occurring. Your performance management strategy should include employment contracts that contain clear job descriptions, comprehensive workplace policies and procedures, adequate training, regular performance reviews, compliance with the Modern Awards, National Employment Standards, Occupational Health and Safety laws, the Fair Work Act (Cth) and suitable financial (and other) rewards.

How should a performance improvement plan be implemented?

A PIP must be designed to help an employer manage an employee’s behaviour or underperformance or poor performance. We recommend that if an employer decides to implement a PIP, they should take the following steps:

1. Conduct a formal or informal discussion between the parties to identify the issues and to agree upon performance goals.  This step may flush out reasons why the employee may be performing badly, for e.g., the employee is unclear about what is expected of them, the employee does not have the knowledge or skill set required to do the job, the employee has been given inadequate equipment to perform the job, there are interpersonal differences between the employee and their manager or personal or family problems unrelated to work.
2. Draft a PIP. The PIP document must clearly identify the performance issue.  The employer must:
• Provide specific examples of the employee’s behaviour or actions that are causing issues;
• Identify when it is occurring;
• Explain why it’s an issue;
• Specify how the behaviour or action needs to change or improve; and
• In what timeframe improvement is expected to occur.
3. Be prepared to provide evidence that demonstrates the problem – client feedback, statistics, examples of the employee’s work, etc.. Make copies to give to the employee.
4. Consider the employee’s defined role and the employer’s existing expectations (for example, Key Performance Indicators (KPIs)); and
5. Ensure the PIP is consistent with existing workplace policies on employee performance or conduct.
6. Meet with the employee. The employer must meet with the employee to go over the PIP allowing: 
• The employee to have an opportunity to discuss the performance issue or behavioural concern that has been identified; and
• The employer to understand why the employee feels the performance issue or behavioural concern is occurring.  
• The employee is entitled to bring a support person to this meeting.
7. Get employee agreement. The employer should finalise the PIP with the agreement of the employee.
• Goals, benchmarks, and timeframes must be discussed and agreed with the employee.
• The final PIP must be signed by both the employee and the employer.
8. Monitor the employee’s progress.

• There should be scheduled meetings between employer and employee and reviews against the PIP criteria.
• Assessment cannot be general or arbitrary; the employer needs to be able to point to an objective criterion.
• If the employee is continuing to not meet progress markers it is important to consider and offer additional support that may be required, for e.g., reduced workload or informal coaching.

1. Have a final meeting to communicate results. The employer should meet with the employee after the conclusion of the PIP. 

• A final meeting must take place with the employee post the implementation of the improvement process.
• A decision must be made with respect to the employee’s employment, and this will need to be communicated to the employee both in person and in writing.  We recommend limiting the number of individuals making that decisions as it could mean all decision makers will be required to give evidence in possible legal proceedings.
• Again, the employee is entitled to have a support person attend this meeting.

The processes described above may need to be adapted depending on the employee, the nature of the work and PIP itself.  For both employers and employees, the earlier you speak to an employment lawyer about your rights and obligations with respect to a PIP, the better informed you will be to protect yourself throughout the process.