Using A Fair Work Performance Improvement Plan (PIP) In Australia

When an employee isn’t meeting expectations, a well-run Performance Improvement Plan (PIP) can turn things around and protect your business at the same time. Done properly, a PIP shows that you’ve given the employee clear goals, fair support and reasonable time to improve - which is exactly what tribunals look for if things later escalate.

In this guide, we’ll walk through how to design and run a Fair Work-compliant PIP from an employer’s perspective. We’ll cover when to use a PIP, what to include, common pitfalls to avoid, and how to move to next steps if performance doesn’t improve.

Our aim is to help you manage performance issues confidently, with a process that’s fair, consistent and legally sound - so you can focus on running your business.

What Is A Performance Improvement Plan Under Fair Work?

A Performance Improvement Plan (PIP) is a structured, time-limited plan that sets out where performance is falling short, the standard required, the support you’ll provide and how progress will be measured. It’s a formal part of Performance Management that helps you demonstrate procedural fairness.

Fair Work principles expect employers to clearly communicate expectations and give employees a reasonable chance to improve before taking disciplinary action. A PIP does exactly that. It’s not a punishment - it’s a roadmap for improvement backed by documented evidence.

For small businesses, a PIP also creates consistency. With a clear template and timeline, different managers can follow the same steps, reducing the risk of ad hoc or potentially unfair treatment.

When Should You Put An Employee On A PIP?

Consider a PIP when you’ve noticed consistent underperformance or repeated breaches of role expectations, and informal coaching hasn’t worked. Common triggers include missed KPIs, quality issues, poor attendance, or not following processes.

Before starting a PIP, make sure expectations were clear from the outset. Check the employee’s Employment Contract, position description and any documented KPIs. If expectations weren’t clearly set, fix that first - then assess performance against the clarified standards.

It’s also important to consider whether there are any health, personal or workload factors affecting performance. If the employee raises medical concerns or caring responsibilities, you’ll need to accommodate where reasonable and avoid any risk of discrimination.

For new starters, if they’re still in probation, your approach may be different. You can still use a short PIP to keep things fair, but you may ultimately decide on termination during probation if performance doesn’t improve and your contract allows it.

How Do You Run A Fair And Compliant PIP, Step-By-Step?

A strong PIP process is clear, collaborative and well-documented. Here’s a simple, legally-aware approach you can follow.

1) Prepare Your Evidence And Objectives

• Collect objective examples of underperformance (dates, tasks, outcomes). Keep opinions out - focus on facts.
• Identify the performance standards (KPIs, job description, policy requirements) the employee needs to meet.
• Decide on a realistic timeframe (often 4-8 weeks) and meeting schedule (e.g. weekly check-ins).
• Ensure your internal framework supports this process - a clear Workplace Policy on performance and conduct helps with consistency.

2) Hold A Start Meeting And Provide The PIP In Writing

• Invite the employee to a formal meeting, let them know they can bring a support person, and share the agenda.
• Explain the concerns and walk through the PIP document. Be specific about what needs to improve and why.
• Ask for the employee’s input and note any support they say they need.

3) Set SMART Goals And Clear Measures

• Make each objective Specific, Measurable, Achievable, Relevant and Time-bound.
• Define how success will be measured (e.g. reduce error rate to under 2% for four consecutive weeks).
• Record the goal, the measurement method and the deadline in the PIP.

4) Provide Support, Training And Resources

• Offer practical support (training sessions, job shadowing, updated tools or checklists).
• Make the support concrete: who provides it, when it happens, and how long it will run.
• Confirm in writing (this becomes key evidence that you gave a genuine opportunity to improve).

5) Monitor Progress And Keep Contemporaneous Notes

• Hold regular check-ins (e.g. weekly) and document what’s working and what still needs improvement.
• Keep minutes of each meeting and send a brief recap email to the employee.
• Be consistent - if you say you’ll meet every Tuesday, stick to it unless rescheduled with notice.

6) Adjust Where Reasonable

• If the employee raises a reasonable barrier (e.g. a software issue or unclear handover), respond promptly.
• You can adjust goals or timelines if that’s fair and helps achieve the outcome: sustained improvement.

7) Conduct A Fair Final Review

• At the end of the PIP, meet to review the evidence against the goals.
• Decide the outcome: success (return to BAU), partial improvement (consider extending the PIP once), or no improvement.
• Remember that procedural fairness is central to section 387 of the Fair Work Act, so ensure the employee had a chance to respond at each step.

8) If Necessary, Move To Formal Process

• If performance remains unsatisfactory, consider disciplinary action consistent with your policies and the evidence.
• Before termination, issue a Show Cause Letter setting out the reasons and inviting a response.
• Only make a final decision after genuinely considering the employee’s reply and any new information.

What Should A PIP Document Include?

Your PIP should be clear, practical and easy for both sides to follow. At a minimum, include:

• Employee details, job title and manager name.
• Summary of performance concerns with dates and objective examples.
• Relevant standards (KPIs, role requirements, policies) the employee must meet.
• SMART goals the employee needs to achieve.
• Support you will provide (training, coaching, resources) with dates and responsible person.
• How progress will be measured (reports, QA checks, audit logs).
• Timeframe of the PIP and the check-in schedule.
• Consequences if goals are not met (e.g. extension, redeployment where appropriate, or disciplinary action up to termination).
• Employee signature and date, noting that signing acknowledges receipt (not necessarily agreement) - also allow them to add comments.

It helps to keep the PIP in a consistent format across the business and to align it with your broader performance management and disciplinary procedures (the latter should be set out in a clear Workplace Policy or staff handbook).

Common Legal Risks (And How To Avoid Them)

A PIP can reduce legal risk - but only if you run it fairly. Here are common pitfalls and how to avoid them.

• Lack of clarity: Vague objectives (“do better at customer service”) aren’t fair. Make goals specific and measurable, and tie them to documented standards.
• Insufficient support: If you expect improvement, you need to provide reasonable coaching or training. Document the support you actually provide.
• No opportunity to respond: Always allow the employee to have their say at the start, during check-ins and before any disciplinary decision. This goes to procedural fairness under section 387 of the Fair Work Act.
• Inconsistent treatment: If two employees make the same mistakes and only one is placed on a PIP, that inconsistency can be risky. Follow policies consistently, or record a clear, lawful reason for different treatment.
• Using a PIP to mask other issues: Don’t use a PIP to manage role redundancy, medical incapacity or misconduct. Each scenario has a different process. For example, serious misconduct often requires an investigation and show cause process, while redundancy is about changes to the role rather than performance.
• Discrimination or adverse action risk: If the employee has raised a complaint, taken a protected leave, or disclosed a health condition, ensure any PIP is genuinely performance-based and well evidenced. When in doubt, get advice early - even a quick check-in with a lawyer can keep you on track.

You’ll also want to ensure performance obligations and standards are anchored in your Employment Contract and relevant policies. This makes it easier to show the employee knew what was expected from day one.

What Happens If Performance Doesn’t Improve?

If goals are not met by the end of the PIP and an extension isn’t appropriate, you may move to formal disciplinary action. Keep the focus on procedural fairness and evidence at each step.

• Invite a response: Send a clear Show Cause Letter that sets out the concerns, the PIP history, and the proposed outcome, and invite a written response and/or meeting.
• Consider the response: Genuinely consider any new facts, evidence or mitigation raised. If appropriate, you can offer a further short extension or alternative duties.
• Make and communicate the decision: If termination is the outcome, confirm it in writing, set out the reasons, and arrange any final entitlements. Depending on the contract and award, you may provide notice or consider payment in lieu of notice.
• Use the right documents: Ensure your letters and records are consistent, compliant and complete. Many businesses streamline this with an Employee Termination Documents pack for different scenarios.

The key is to be able to show that you provided clear expectations, reasonable support and a fair process at every stage. That evidence is often decisive if a dismissal is challenged.

Practical Tips To Make PIPs Work In A Small Business

• Keep it simple: A short, clear PIP is better than a dense document nobody reads. Aim for two to four pages plus attachments.
• Be timely: Address issues early, ideally when patterns first appear. Waiting months makes improvement harder and risks claims that you condoned the behaviour.
• Train your managers: Give managers a short PIP checklist and templates so they follow the same steps every time. Consistency protects your business.
• Be human: People can and do improve. A supportive tone makes it more likely the employee engages with the process.
• Document everything: If it’s not written down, assume you’ll struggle to rely on it later. Keep notes, emails and copies of meeting invites and minutes.

What Legal Documents And Policies Help Your PIP Process?

You don’t need to reinvent the wheel every time. Having the right baseline documents in place makes running a PIP faster and safer.

• Employment Contract: Sets role duties, KPIs (where used), probation, notice and grounds for termination. A tight Employment Contract anchors your expectations.
• Performance And Conduct Policies: Outline standards, feedback timelines, disciplinary steps and support. These sit within your Workplace Policy or staff handbook and guide consistent decisions.
• PIP Template And Meeting Records: A standard PIP template and check-in forms help keep the process consistent and well documented.
• Show Cause Letter Template: If performance doesn’t improve, a compliant letter is essential to invite a response before any decision.
• Termination Letter And Checklist: If termination is necessary, ensure you have the right letters and checklists (e.g. notice, final pay, company property) - the Employee Termination Documents package can cover these.

If you’re missing any of these, it’s worth getting them tailored to your business now - they’ll pay for themselves the first time you need to act quickly and confidently.

Key Takeaways

• A Performance Improvement Plan (PIP) is a structured, time-limited process that sets clear goals, provides support and measures progress.
• Use a PIP when informal coaching hasn’t worked, expectations are clear, and you can support the employee to improve within a reasonable timeframe.
• Run a fair process: set SMART goals, meet regularly, document support and feedback, and allow the employee to respond at each stage.
• Align PIPs with your Employment Contract, KPIs and performance policies to ensure consistency and legal compliance.
• If performance doesn’t improve, follow a procedurally fair disciplinary process (including a Show Cause Letter) before deciding on outcomes like termination or payment in lieu of notice.
• Preparation matters: templates, policies and checklists will help you act quickly while staying compliant and reducing risk.

If you’d like a consultation on implementing a fair and compliant performance improvement plan in your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.