PIP Template: Managing Underperforming Employees In Australia

What Is A Performance Improvement Plan (PIP) And Why Use A PIP Template?

A Performance Improvement Plan (PIP) is a written plan that sets out:

• what performance concerns exist (in practical terms)
• what the required standard is
• what the employee needs to do differently
• what support you’ll provide
• how and when progress will be reviewed
• what may happen if the required improvements aren’t achieved

For small businesses, using a PIP template can be helpful because it turns an uncomfortable, high-stakes issue into a repeatable process. Instead of “winging it” in conversations (or putting off difficult feedback), you have a structured document that keeps everyone aligned.

How A PIP Helps You As An Employer

Used properly, a PIP can help you:

• Set clear standards so the employee understands what “good performance” actually looks like in your business.
• Show procedural fairness by giving the employee a reasonable opportunity to improve with support.
• Create a record of the concerns raised, meetings held, and steps taken (which matters if things escalate).
• Protect team culture by addressing performance issues early rather than letting frustration build across the team.

A PIP isn’t meant to be punitive. Ideally, it’s a genuine opportunity for someone to get back on track with clarity and support.

Is A PIP Legally Required In Australia?

There’s no single rule that says you “must” use a PIP every time performance drops. However, if you move toward disciplinary action or termination for poor performance, the key question often becomes whether you acted reasonably and fairly in the circumstances.

A PIP is one of the clearest ways to demonstrate that you:

• raised performance concerns
• made expectations clear
• provided support and time to improve
• reviewed outcomes before taking further steps

In practice, many employers include PIPs as part of their broader performance management approach (alongside coaching, training and, where appropriate, formal warnings). Keep in mind that the “right” process can also depend on what applies to the employee, including any modern award, enterprise agreement, contract terms, and workplace policies. There may also be additional considerations where issues overlap with illness, disability, discrimination risk, or potential adverse action.

When Should You Use A PIP (And When Should You Not)?

Timing matters. A PIP works best when you can identify a performance gap and you’re willing to support improvement.

Good Situations For A PIP

A PIP is often suitable where:

• the employee has the skills for the role but isn’t meeting standards (quality, speed, accuracy, customer service)
• expectations were unclear and you need to reset them in writing
• there’s been a recent change (new systems, new targets, changed duties) and performance hasn’t caught up
• you’ve already raised concerns informally and the issue is continuing

Situations Where A PIP Might Not Be The Right Tool

A PIP is not always the best fit. For example:

• Misconduct issues (theft, serious safety breaches, harassment) usually require a different process.
• Capability/medical issues may involve different obligations, including considering reasonable adjustments and medical information.
• Role mismatch where the job genuinely isn’t what the employee agreed to (this can become a contract variation issue).
• Immediate risk situations where you need to act urgently to protect customers, staff, or business assets.

If the issue is serious misconduct or you’re considering suspension while you investigate, the steps you take should be carefully managed and documented. In higher-risk cases, it’s worth getting advice early.

Check Your Foundations First

Before you start a PIP, it helps to confirm you’ve got the basics right, including:

• a clear position description (or at least clear role expectations)
• workplace policies and performance standards
• a properly drafted Employment Contract that reflects the role and your expectations

These documents don’t solve performance issues on their own, but they make it much easier to define what “meeting expectations” means.

How To Run A Fair PIP Process (Step-By-Step)

A PIP should be structured, consistent, and respectful. Here’s a practical process many Australian small businesses follow. (This is general information only and isn’t legal advice. Your obligations can vary depending on the employee’s role, award or enterprise agreement coverage, length of service, and the circumstances.)

1. Identify The Performance Issue (Be Specific)

Start with evidence-based examples. Instead of “your attitude isn’t great”, focus on observable outcomes such as:

• missed deadlines (how often? what impact?)
• repeat errors (what type? what frequency?)
• customer complaints (what happened? what standard applies?)
• failure to follow procedures (which procedure? why it matters?)

This is also the point where you should check if there’s an underlying issue you need to consider (training gap, unclear instructions, workload, personal difficulties, etc.).

2. Hold A PIP Meeting And Explain The Purpose

Book a private meeting and let the employee know the topic in advance. In the meeting:

• explain the performance concerns clearly
• give the employee an opportunity to respond
• confirm you’re putting a plan in place to support improvement

If your business has a performance management policy, follow it closely. If you’re building your process from scratch, having a consistent written approach (and using the same PIP template each time) reduces confusion and helps you stay fair.

3. Document The PIP In Writing (Using Your PIP Template)

After (or during) the meeting, put the plan in writing and provide it to the employee. Your PIP should avoid legal jargon and read like a clear checklist.

If performance issues are already significant, some businesses also use a formal written communication to set expectations and explain next steps. In more serious cases, employers may consider a show cause letter approach (particularly where termination is being considered), but this depends on the situation and should be managed carefully.

4. Provide Support (And Actually Follow Through)

A PIP should not be “set and forget”. If you promise training, resources, mentoring, or weekly check-ins, you need to deliver them.

Common support measures include:

• refresher training on systems or processes
• shadowing a more experienced team member
• adjusted priorities while learning a key task
• regular feedback sessions with a manager

One of the biggest risks we see is when a PIP says “we will provide support”, but in practice nothing changes. That can undermine the fairness of the process and make it harder to defend later.

5. Review Progress At The Agreed Times

Schedule review meetings in advance. At each review:

• check progress against the measurable goals in the PIP
• document outcomes
• adjust the plan if needed (for example, if targets were unrealistic or the role changed)

If improvement is happening, acknowledge it clearly. That’s good leadership and helps the process feel constructive rather than threatening.

6. Decide Next Steps (Close, Extend, Escalate)

At the end of the PIP period, you’ll usually land in one of three places:

• PIP successful: close the plan and confirm ongoing expectations.
• Some improvement, not enough: extend the plan if it’s reasonable to do so.
• No improvement: escalate to the next stage of your performance management process, which may include formal warnings and, in some cases, termination.

If you’re considering termination, ensure you understand your notice and process obligations (including any additional steps required under an award, enterprise agreement, policy, or (for some small businesses) the Small Business Fair Dismissal Code). Depending on the circumstances, you may also be thinking about payment in lieu of notice (where you end employment immediately but pay out the notice period), which needs to be handled correctly.

What Should A PIP Template Include? (A Practical Australian Employer Checklist)

A strong PIP template is clear, measurable, and tailored to the role. Below is a practical structure you can adapt.

PIP Template Sections

• Employee details: name, position, manager, date.
• Reason for the PIP: a short summary of the concerns.
• Performance areas to improve: broken into categories (quality, productivity, communication, attendance, etc.).
• Required standard: what “meeting expectations” looks like in your business.
• Improvement actions: what the employee will do differently.
• Support from the business: training, resources, supervision, check-ins.
• Timeline: start date, review dates, end date.
• How success will be measured: metrics, examples, targets.
• Consequences if not achieved: next steps (for example, further performance management, warnings, termination).
• Signatures: employee and manager acknowledgement (signature doesn’t necessarily mean agreement, but it confirms receipt and discussion).

Example PIP Goals Table (You Can Copy This Format)

Performance Area	Current Issue	Required Standard	Actions & Support	Review Date
Customer Response Times	Customer emails often unanswered for 2-3 days	Respond within 1 business day (or escalate if complex)	Daily inbox check at 9am; template responses provided; weekly check-in with manager	14 days from start
Accuracy	Frequent data entry errors in orders	Less than 2 errors per week; follow checklist	Refresher training; introduce order checklist; quality spot-checks twice per week	21 days from start
Team Communication	Not updating team on task progress	Update project board daily; notify lead of blockers same day	Training on workflow tool; buddy system with senior staff member	Weekly

What “Measurable” Really Means In A PIP

Measurable doesn’t always mean “hard numbers”, but it does mean the employee should be able to tell whether they’re on track.

Examples of measurable outcomes include:

• “No more than X errors per week”
• “Respond to customers within X hours”
• “Complete daily handover notes by 4:30pm each shift”
• “Follow the documented process every time (checked via spot audits)”

If your PIP relies only on vague statements like “improve attitude” or “be more professional”, it becomes hard to assess fairly (and hard to defend if there’s a dispute).

Common Mistakes Small Businesses Make With PIPs (And How To Avoid Them)

Even with a good PIP template, the way you use it matters. Here are common pitfalls we see in small businesses.

1. Turning The PIP Into A Surprise

A PIP should rarely be the first time an employee hears there’s a concern. If performance issues have been raised casually before, say that, and reference prior coaching conversations.

People tend to respond better when feedback is consistent and not delivered as a sudden “paper trail”.

2. Setting Unreasonable Timeframes

Some roles allow quick improvement (for example, punctuality or basic admin processes). Others need longer (sales performance, technical proficiency, leadership skills).

Ask yourself: if you were new to the role, would this timeframe be realistic with training and support?

3. Failing To Consider Personal Leave, Illness Or Other Issues

If the employee raises health concerns or needs time off, you may need to adjust timeframes or gather more information. A PIP process should be flexible enough to deal with real life.

As a general point, managing absences alongside performance can be tricky, especially if someone is using sick leave during a performance management period. If this arises, it’s worth understanding your obligations around sick leave and evidence requirements, and considering whether anti-discrimination obligations or reasonable adjustments are relevant.

4. Mixing Up Misconduct And Performance

Underperformance is about capability, output, quality, or meeting role expectations. Misconduct is about behaviour that breaches standards (like dishonesty, bullying, or serious policy breaches).

If you treat misconduct as “performance” and run a PIP instead of a proper investigation or disciplinary process, you risk mishandling a serious issue.

5. Not Aligning The PIP With Your Broader HR Documents

A PIP should fit within your overall employment framework. For example:

• your contract terms
• your workplace policies
• any internal procedures around warnings and escalation

If you have a structured performance management process, keep it consistent. Many businesses formalise this as part of a broader performance management process, especially as their team grows.

6. Rushing Into Termination Without Proper Steps

If the PIP doesn’t work, you may be considering termination. This is where process becomes especially important, including notice, documentation, and giving the employee a chance to respond.

If the employee is still in their early employment period, you may also be thinking about different pathways depending on tenure and the terms of the contract. It’s common for employers to ask how termination works during the early stages of employment, including termination during probation, which still needs to be handled carefully.

7. Overlooking Alternatives To A PIP (When Appropriate)

Sometimes a PIP isn’t the best solution. Depending on what’s happening, alternatives might include:

• a role redesign or adjusted duties (if the business has changed)
• additional training and a shorter coaching plan (if issues are minor)
• a mutual separation, documented properly (in some cases)

If both sides recognise the role isn’t working out, a structured exit can sometimes be the cleanest option. Businesses often document this with a mutual separation agreement to clearly record terms and reduce misunderstandings.

Key Takeaways

• A well-designed PIP template helps you manage underperformance in a structured, fair, and measurable way.
• PIPs work best when the issue is performance (not misconduct) and you’re willing to provide real support and clear expectations.
• A strong PIP includes specific concerns, measurable goals, support measures, review dates, and clear next steps.
• Short, regular review meetings and consistent documentation are often what make a PIP effective (and defensible).
• Common risks include vague goals, unrealistic timelines, failing to provide support, and rushing into termination without proper process.
• If you’re unsure whether a PIP is the right tool (or how to escalate after a PIP), getting advice early can save you time and reduce legal risk.

If you’d like help putting together a PIP template and performance management process for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.