Performance Improvement Plans for Employers

28 August 2026

Managing an employee who is not meeting the required standards can be challenging for any employer. While performance concerns need to be addressed, employers should also ensure the process they follow is clear, reasonable and appropriately documented.

A Performance Improvement Plan (PIP) is one way employers can formally address ongoing performance concerns. It sets out where an employee’s performance is falling short, what improvement is expected and how the employee will be supported and assessed over a defined period.

A PIP can form an important part of a broader performance management process, but simply placing an employee on a PIP does not automatically protect an employer if the employment relationship later ends.

The process followed before, during and after the PIP can become particularly important if an employee subsequently makes an unfair dismissal, general protections or other workplace claim.

What Is a Performance Improvement Plan?

A Performance Improvement Plan, commonly referred to as a PIP, is a structured process used to address concerns about an employee’s work performance.

The plan will generally identify:

  • the areas where the employee is not meeting expectations;
  • the performance standard expected of the employee;
  • measurable improvements the employee is expected to make;
  • any training, guidance or support being provided;
  • how progress will be assessed;
  • a timeframe for improvement; and
  • the potential consequences if sufficient improvement is not achieved.

A PIP should not simply be a document presented to an employee immediately before termination.

When used appropriately, it provides the employee with clarity about the employer’s concerns and a genuine opportunity to improve their performance.

When Should an Employer Use a PIP?

A PIP may be appropriate when an employee has ongoing performance issues that have not been resolved through ordinary feedback, coaching or supervision.

For example, an employer may consider a PIP where an employee is consistently:

  • failing to meet reasonable performance expectations;
  • missing deadlines or productivity requirements;
  • producing work below the required standard;
  • failing to perform important aspects of their role;
  • making repeated errors;
  • not following reasonable workplace procedures; or
  • failing to demonstrate improvement after previous feedback.

However, employers should first understand what is causing the issue.

Poor performance may be different from misconduct. An employee who is unable to perform their role to the required standard presents a different management issue from an employee who deliberately refuses to follow a lawful and reasonable direction.

Employers should also consider whether other factors may be relevant, including inadequate training, unclear expectations, changes to duties, workplace issues or circumstances that may create additional legal considerations.

What Should a Performance Improvement Plan Include?

No single PIP template will be appropriate for every workplace or employee.

A useful PIP should still be specific enough that the employee understands exactly what needs to change.

The Performance Concerns

Clearly identify the aspects of the employee’s performance that are considered unsatisfactory.

Broad statements such as “your performance needs to improve” may provide little practical guidance. Wherever possible, support concerns with specific examples.

The Required Standard

Explain what satisfactory performance looks like.

This may involve reference to the employee’s position description, established KPIs, workplace policies, reasonable management expectations or other relevant standards.

Measurable Objectives

Set objectives that allow both the employer and employee to determine whether improvement has occurred.

The measures should be reasonable and relevant to the employee’s role.

Support and Resources

Identify what assistance will be provided.

Depending on the circumstances, this could include additional training, coaching, closer supervision, regular feedback or access to appropriate resources.

Review Meetings

Establish when progress will be reviewed.

Regular meetings allow the employer to provide feedback and allow the employee to respond to concerns as the PIP progresses.

Timeframe

Specify how long the performance improvement process will run and when a final assessment will occur.

Possible Consequences

The employee should understand what may happen if their performance does not improve sufficiently.

Depending on the circumstances, continued unsatisfactory performance may result in further disciplinary action or termination of employment.

How Long Should a PIP Run?

There is no universal timeframe for every Performance Improvement Plan.

The appropriate period will depend on factors such as:

  • the employee’s position;
  • the nature of the performance problem;
  • how frequently the relevant duties are performed;
  • the seriousness and history of the concerns;
  • how long it would reasonably take to demonstrate improvement; and
  • the training or support required.

Some performance issues may be assessed relatively quickly, while others may require a longer period before meaningful improvement can be measured.

Employers should avoid choosing an arbitrary timeframe simply because they routinely use the same PIP period for every employee.

The key question is whether the employee has been given a reasonable opportunity to understand and respond to the concerns and demonstrate the required improvement.

Does Fair Work Require a Performance Improvement Plan?

The Fair Work Act 2009 (Cth) does not impose a general requirement that every underperforming employee must complete a formal PIP before their employment can be terminated.

However, this does not mean employers should dismiss an employee as soon as performance concerns arise.

If an employee is protected from unfair dismissal, the Fair Work Commission can consider a range of factors when determining whether a dismissal was harsh, unjust or unreasonable.

Where the dismissal relates to unsatisfactory performance, the process followed by the employer can be particularly important.

Depending on the circumstances, this can include whether the employee:

  • understood the employer’s concerns;
  • was warned about their unsatisfactory performance;
  • understood that their employment could be at risk;
  • had an opportunity to respond;
  • had a reasonable opportunity to improve; and
  • was treated fairly throughout the process.

A formal PIP can help employers establish a structured and documented process, but the existence of a PIP alone does not determine whether a dismissal is lawful or fair.

Can You Terminate an Employee After a PIP?

Potentially.

If an employee does not demonstrate the required improvement during a PIP, termination may ultimately be considered.

However, employers should avoid treating the end of a PIP as an automatic trigger for dismissal.

Before making a decision, an employer should consider matters including:

  • whether the performance expectations were reasonable;
  • whether the concerns were properly communicated;
  • whether adequate support was provided;
  • whether the employee had a genuine opportunity to improve;
  • whether the PIP outcomes were assessed fairly;
  • any explanation provided by the employee;
  • applicable employment contracts, policies, awards or enterprise agreements; and
  • the employer’s potential exposure to an unfair dismissal or other workplace claim.

Employers should also distinguish between termination for poor performance and termination for serious misconduct, as different considerations can apply.

Where termination is being contemplated, obtaining employment law advice before making the final decision can help identify potential risks.

Common PIP Mistakes Employers Make

A poorly managed PIP can create additional risk rather than reduce it.

Common problems include:

Deciding to Terminate Before the PIP Starts

A PIP should provide a genuine opportunity for improvement.

Using a predetermined process to create documentation before dismissing an employee can undermine the integrity of the performance management process.

Setting Unrealistic Targets

Performance expectations should be reasonable and relevant to the employee’s role.

Targets that are impossible to achieve may create questions about whether the employee was genuinely allowed to improve.

Using Vague Performance Concerns

Employees need to understand what they are expected to improve.

Specific examples and measurable expectations generally provide a stronger foundation than broad criticism.

Failing to Document Meetings

Important discussions, feedback, employee responses and agreed actions should be appropriately documented.

Contemporaneous records can become particularly important if the process is later challenged.

Changing the Goalposts

Employers should avoid continually introducing new performance requirements during the PIP without a legitimate reason.

Ignoring the Employee’s Response

Performance management should not be a one-way process.

Employees should have an appropriate opportunity to respond to concerns and provide relevant information.

Confusing Performance With Misconduct

Poor performance and misconduct are not necessarily the same thing.

Employers should identify the actual issue before determining the appropriate management or disciplinary process.

PIP vs Formal Warning

A Performance Improvement Plan and a formal warning can form part of the same performance management process, but they serve different purposes.

A PIP generally establishes a structured period during which an employee is expected to improve specified aspects of their performance.

A formal warning generally communicates that the employer considers particular conduct or performance unacceptable and may warn the employee about the consequences if the issue continues.

Depending on the circumstances, an employer may issue a formal warning before or during a PIP.

There is also no universal rule that an employer must give an employee three warnings before terminating employment.

What is appropriate will depend on the circumstances, including the nature and seriousness of the performance concerns and the applicable legal and contractual framework.

Performance Management and Unfair Dismissal Risk

Performance-related dismissals can result in unfair dismissal claims where an eligible employee disputes either the reason for dismissal or the process the employer followed.

When assessing an unfair dismissal application, the Fair Work Commission may consider whether there was a valid reason for dismissal relating to the employee’s capacity or conduct and whether procedural fairness was provided.

For employers managing poor performance, this makes the steps leading up to termination important.

A well-managed process may demonstrate that:

  • legitimate performance concerns existed;
  • those concerns were clearly communicated;
  • the employee knew what improvement was required;
  • appropriate warnings were provided;
  • the employee had an opportunity to respond;
  • reasonable support was available; and
  • the final decision was based on the employee’s actual performance and the circumstances of the case.

Employers should also remember that unfair dismissal is not the only potential risk.

Performance management can intersect with general protections, discrimination, workplace rights, bullying allegations and other employment law issues.

For example, additional care may be required where performance concerns arise around the same time an employee has exercised a workplace right, raised a complaint, taken protected leave or disclosed circumstances protected by workplace laws.

How Hentys Helps Employers Manage Underperformance

Managing poor performance requires employers to balance operational requirements with their employment law obligations.

Hentys acts for employers and businesses, providing practical employment law advice throughout the performance management process.

We can assist employers with:

  • assessing performance concerns;
  • developing performance management strategies;
  • preparing and reviewing Performance Improvement Plans;
  • drafting formal warnings;
  • managing difficult performance meetings;
  • reviewing employment contracts and workplace policies;
  • advising on disciplinary processes;
  • assessing termination options and risks;
  • managing unfair dismissal and general protections claims; and
  • representing employers in Fair Work Commission proceedings.

Getting advice early can be particularly valuable where performance concerns have continued for some time, an employee disputes the allegations, termination is being considered, or other workplace issues may complicate the process.

If your business is dealing with an underperforming employee, Hentys can help you develop a practical performance management process and understand the employment law risks before taking further action.

This article provides general information only and does not constitute legal advice. Employment law obligations and risks depend on the circumstances of each matter. Employers should obtain advice specific to their situation before taking disciplinary or termination action.