Employee Performance Improvement Plan: What You Need To Know

Performance conversations often begin quietly. A quick chat in the corridor or a brief check-in across a desk. In many cases, these informal pep talks are all it takes to get things back on track.

But what happens when the issues persist?

When there's a consistent gap between expectations and results, it's time to move from informal chats to a clear, structured, and legal approach.

A Performance Improvement Plan in Australia is a formal, supportive tool designed to bridge the gap between an employee's current performance and the standard required for their role. It lays out specific issues, sets clear goals for improvement, and provides a timeline and resources to help the employee succeed.

A well-managed PIP brings clarity, fairness, and accountability to an otherwise difficult situation.

When Should You Implement a PIP?

A PIP should never be a surprise. It's the logical next step when informal feedback clearly hasn't worked and the underperformance is becoming a problem. The signs are usually clear:

• Deadlines are consistently missed, causing delays for the rest of the team.
• The quality of work is poor, requiring constant correction from others.
• Client feedback turns negative or complaints start coming in.
• Key parts of the job are simply not being done.

When these patterns emerge, a formal PIP process moves the conversation from subjective feedback to objective, documented goals.

Legal Considerations Before Starting a PIP

Before you begin a PIP, you should understand your legal obligations under the Fair Work Act 2009. A poorly executed plan can expose your business to claims of bullying or unfair dismissal.

The law protects employees from being dismissed in a way that is harsh, unjust, or unreasonable. A PIP can be your strongest evidence of a fair process, but only if the plan itself is reasonable:

• Is it justified? You need a genuine, evidence-based reason for the PIP. It can't be used to target someone you don't like or to manage them out of the business without cause.
• Are the goals achievable? Setting an employee up to fail with impossible targets can be seen as an unfair performance improvement plan. The goals must be realistic and within the employee's control.
• Is the timeframe fair? The employee needs enough time to absorb the feedback, undertake training, and demonstrate improvement. A few days is rarely enough; a month or more is standard.

Understanding your responsibilities around performance improvement plan employee rights is non-negotiable. Fairness protects both sides.

If you'd like tailored guidance on your specific obligations, our Employment Law & WHS services can provide the clarity you need.

Case Study: Paranihi v Roy Hill Holdings

The case of Jayde Paranihi v Roy Hill Holdings Pty Ltd shows exactly why a fair, reasonable, and well-documented PIP is so important.

The Allegations

The process began after Mr. Paranihi was found using his mobile phone for an extended period during work hours. After admitting to the conduct, he was offered a choice: accept a settlement agreement to leave the business or undertake a Performance Improvement Plan.

He chose the PIP.

The Arguments

Mr. Paranihi later resigned and filed a legal claim, arguing he was effectively forced out (a constructive dismissal). He claimed the PIP's targets (a daily count of 150 freight items) were "impossible" and were part of a plan designed to make him quit.

The employer argued the PIP was a genuine second chance. They provided evidence that the 150-item target was actually lower than the standard target for other employees in similar roles, and had been reduced specifically to help Mr. Paranihi succeed.

The Fair Work Commission Decision

The Fair Work Commission found the employer's actions were indeed reasonable. It noted that the PIP was based on "sound reasons" and that the targets were "reasonable and achievable," pointing out that Mr. Paranihi had in fact met the target on some days.

Crucially, the FWC determined that Mr. Paranihi had not been dismissed. He had other options besides resigning, such as continuing with the PIP or using the company's dispute resolution procedure, and had chosen to leave voluntarily. In result, his application was dismissed because the Commission had no jurisdiction to hear the case.

This case reinforces why process matters. A robust, fair, and defensible PIP can protect an employer from claims that their management actions forced an employee to resign.

Employee Rights During a PIP

Being placed on a PIP can feel confronting and isolating. Know this: you have rights, and you are not expected to simply accept a plan you believe is unfair.

You can, and should:

• Ask for a support person to be with you in any meetings.
• Provide a written response to the plan if you disagree with any part of it.
• Request clear, measurable goals so you know exactly what success looks like.
• Seek legal advice early, especially if you feel the PIP is discriminatory or lacks a genuine basis.

Understanding your performance improvement plan employee rights can be overwhelming. You are not alone. For a confidential discussion about your situation, Contact Coleman Greig's Employment Law Team.

Best Practices for Employers Using a PIP

To make the PIP process effective and legally sound, focus on a fair and supportive approach:

• Be Specific, Be Objective: Replace vague goals like "be more proactive" with clear, measurable actions. For example, "Develop and present a draft project plan for review by next Tuesday."
• Make it a Consultation, Not a Directive: Discuss the plan with your employee. Listen to their perspective and be open to reasonable adjustments. Collaboration builds trust.
• Document Everything: Keep clear, factual notes of all meetings, agreed actions, and progress reviews. This documentation is essential.
• Offer Genuine Support: A PIP should be about improvement, not punishment. Provide access to training, mentoring, or other resources that can help the employee succeed.

What Happens If the PIP Is Not Met?

If the employee in question does not improve by the end of the PIP period, you must decide the next step carefully. The outcomes are not automatic and require careful consideration. Options include:

• Extending the PIP if genuine effort and progress has been made.
• Issuing a formal warning.
• Exploring redeployment to a more suitable role.
• Moving to terminate employment.

If you choose termination, the Fair Work Commission will look closely at the entire process. A dismissal that follows an unfair performance improvement plan is a significant legal risk, so your documentation and adherence to a fair process will be scrutinised.

Need Help With a PIP? Speak to Our Employment Law Team

Performance Improvement Plans sit at the complex intersection of management, human resources, and the law. Getting it wrong can have serious consequences.

Let us help you move forward with confidence. Contact Us today to speak with one of our experienced employment lawyers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.