What Is A Performance Improvement Plan (PIP) In Australia?

When a team member isn’t meeting expectations, it can put pressure on a small business quickly. You may feel torn between supporting them to lift their performance and protecting your business’ day-to-day operations.

A Performance Improvement Plan (PIP) is a structured way to do both. Used well, it gives the employee a fair chance to improve with clear goals and support. It also documents your process so you can make confident, defensible decisions if performance doesn’t turn around.

In this guide, we’ll unpack what a PIP is in Australia, when to use one, how to run a fair process step-by-step, what to include in the document, and the legal issues to keep in mind as an employer. By the end, you’ll have a practical framework you can apply in your business.

What Is A Performance Improvement Plan (PIP)?

A Performance Improvement Plan is a formal, time‑limited plan that sets out:

• The specific performance concerns you’ve identified.
• What “good” looks like (clear, measurable expectations).
• What support you’ll provide (training, check‑ins, resources).
• How and when performance will be reviewed.
• What happens next if the standards are or aren’t met.

Think of a PIP as a roadmap. It translates general feedback into actionable steps, so your employee understands exactly what needs to change and by when.

Used fairly, a PIP can help you retain a team member who lifts their performance. If there’s no improvement, it also provides contemporaneous records supporting further action-such as redeployment, role change, or ending employment-consistent with your Workplace Policies and the Fair Work framework.

When Should You Use A PIP?

A PIP isn’t the first step in performance management. Before you initiate one, make sure you’ve:

• Addressed concerns informally (coaching, feedback, expectations reset).
• Checked that your expectations align with the role description and the employee’s Employment Contract.
• Considered whether training, tools, workload or other workplace factors are contributing to underperformance.

If problems persist, a PIP can be appropriate when:

• Performance gaps are ongoing, specific and documented.
• The employee appears willing to improve with guidance.
• You need a formal structure and timeline to assess improvement.

Sometimes a PIP isn’t the right tool. For example, if the issue is serious misconduct, you may need to follow a disciplinary process and potentially issue a show cause letter instead. If the employee is very new, it might be more appropriate to manage expectations during the probation period, including considering termination during probation if the role isn’t the right fit.

How To Run A Fair PIP: Step-By-Step

Fairness is the backbone of an effective PIP. Here is a practical workflow small business employers can follow.

1) Confirm The Performance Gap (With Evidence)

• List specific examples where performance fell short (dates, tasks, outcomes).
• Cross-check the examples against the role description, KPIs and agreed priorities.
• Note any contributing factors (e.g. new systems, insufficient training, unclear instructions).

Specificity matters. Vague concerns (“bad attitude” or “not proactive”) are hard to improve or assess. Focus on observable behaviour and outcomes.

2) Prepare A Draft PIP Document

Map each concern to a clear expectation and a measurable target. For example:

• Concern: Customer emails unanswered for 48+ hours several times in April.
• Expectation: Respond to customer emails within 1 business day.
• Measure: 95%+ of emails answered within 1 business day for 6 consecutive weeks.

Include the support you’ll provide, check‑in dates, and the review period end date. We outline what to include in more detail below.

3) Meet With The Employee (And Listen)

• Invite the employee to a PIP meeting, share the draft in advance, and give them the opportunity to bring a support person if your workplace policies allow.
• Explain the concerns and proposed expectations calmly and factually.
• Ask for their perspective. There may be context you haven’t seen (e.g., unreported system issues, workload bottlenecks).
• Refine the PIP together if appropriate. The plan should be challenging but achievable.

4) Confirm The PIP In Writing

Issue the PIP document after the meeting, noting the start date, end date, check‑ins and what improvement looks like. Clarify that failure to meet the plan may lead to further action, up to and including termination, consistent with your policies and contract.

5) Provide Support And Monitor Progress

• Deliver the promised support (e.g., training, mentoring, process tweaks).
• Hold regular check‑ins (weekly or fortnightly) and keep minutes.
• Give balanced feedback-acknowledge progress and be specific about gaps.
• Adjust the plan if new information emerges (e.g., unexpected leave or resourcing changes), and document any amendments.

6) Review And Decide Next Steps

At the end of the PIP period, assess performance against the measures:

• Meets expectations: confirm in writing. Consider ongoing KPIs and recognition.
• Partial improvement: extend the PIP with refined targets if fair and reasonable.
• No improvement: consider options such as redeployment (if suitable), role change, or ending employment with appropriate process and documentation. Many employers benefit from structured support at this stage through a formal performance management process.

What Should A PIP Document Include?

Your PIP should be clear, specific and easy to follow. Consider including:

• Employee and role details.
• Summary of performance concerns (with specific examples and dates).
• Performance expectations framed as outcomes or behaviours.
• Measurable targets or KPIs and how they’ll be assessed.
• Support to be provided (training, mentoring, tools, shadowing).
• Check‑in schedule and who will be present.
• PIP start and end dates (typical periods are 4-8 weeks, adjusted to the role).
• Clear consequences if performance doesn’t meet expectations by the end of the PIP.
• Signature or acknowledgement line to confirm the employee has received the plan (even if they don’t agree with all aspects).

It’s also sensible to ensure your PIP aligns with any internal policy. If you don’t have one, consider implementing high-level Workplace Policies that outline your approach to performance management, so expectations are consistent across the business.

Legal Risks And Compliance: What Employers Need To Know

Getting the process right reduces legal risk and supports fair outcomes. These are the key issues to keep in mind.

Unfair Dismissal Risk

If termination becomes necessary, the Fair Work Commission looks at whether the dismissal was harsh, unjust or unreasonable. The factors in section 387 of the Fair Work Act 2009 (Cth) include whether the employee was notified of the performance issue, given an opportunity to respond, and warned that their job was at risk if improvement didn’t occur.

A well‑run PIP helps address these factors by documenting notice of issues, reasonable timelines, support, and clear warnings.

Adverse Action And Discrimination

Be careful not to initiate or escalate a PIP for a prohibited reason (e.g., because the employee took personal leave, made a complaint, or due to protected attributes like age, race, sex, disability). Ensure all PIP content is anchored to performance outcomes and documented evidence.

If performance concerns overlap with health or capacity issues, you may also need to consider reasonable adjustments or medical clarification rather than treating it purely as discipline.

Procedural Fairness

Procedural fairness means giving the employee a fair chance to understand the concerns, respond, and improve. In practice:

• Share the evidence and expectations clearly.
• Allow a support person at key meetings where reasonable.
• Stick to agreed timeframes and support commitments.
• Objectively assess the results at the end of the PIP period.

Consistency And Documentation

Apply your process consistently across similar roles and issues. Keep thorough records of meetings, emails, check‑ins and achievements during the PIP. Good records are critical if decisions are later reviewed.

PIP vs Other Processes: Which Path Fits The Situation?

Not all performance issues are alike. It’s important to choose the right path for the problem you’re facing.

PIP vs Probation Management

Probation is a predefined period (as set out in the Employment Contract) when you assess suitability for the role. You’ll usually rely on regular feedback and shorter timeframes. If the fit isn’t right, you may decide not to confirm employment-see our guide on termination during probation for process considerations.

PIP vs Misconduct Process

PIPs are for underperformance (e.g., quality, speed, accuracy, communication). Serious misconduct (e.g., theft, violence, serious safety breaches) generally requires a different process-often investigation, a show cause letter, and a disciplinary outcome if allegations are substantiated.

PIP vs Capacity/Medical Management

If performance issues are linked to injury or illness, a capability process may be more appropriate. This could involve medical information, reasonable adjustments, or a graduated return-to-work plan rather than performance targets alone.

Essential Documents To Support A PIP

Solid, tailored documents make your PIP smoother and reduce risk.

• Employment Contract: Sets the role’s duties, reporting lines, probation, notice and key terms, so expectations are clear from day one.
• Workplace Policies: Outline your performance management approach, meeting protocols and record-keeping standards.
• PIP Template: A structured document to capture goals, supports and timelines. Tailor it to the role and concerns.
• Meeting Records: Brief minutes of PIP meetings and check‑ins. These create a timeline of fairness and support.
• Termination Documents: If dismissal becomes necessary, ensure you have the right letters and process documents to close out the employment lawfully.
• Follow‑On Letters: If the PIP fails, you may need to proceed with a formal warning, a show cause letter or other next steps under your policies.

If you anticipate that ending employment may be the outcome, it can help to plan the later stages early, including timeframes and who will attend meetings, so you stay consistent with your performance management process.

Common Mistakes To Avoid With PIPs

We often see small businesses run into trouble due to avoidable missteps. Watch out for these:

• Vague Plans: “Do better” isn’t helpful. Use specific, measurable targets tied to the role.
• Unrealistic Timeframes: Set a reasonable period for improvement based on the nature of the work and training required.
• Insufficient Support: If you promise training or coaching, deliver it. A plan without support can look unfair.
• Moving Goalposts: Don’t add new concerns mid‑plan without resetting the timeline and being transparent.
• Punitive Tone: A PIP should be developmental, not disciplinary. Keep language constructive and professional.
• Skipping Warnings: If employment is at risk, say so clearly. This is relevant to the section 387 factors in unfair dismissal cases.
• Documentation Gaps: Keep complete records of meetings, feedback and results. If the process is challenged, your notes are your evidence.

What Happens If The PIP Fails?

If the employee doesn’t meet the standards by the end of the PIP, you have options. Which path you take depends on the role, your business needs, and the history of the matter:

• Extend The PIP: If there’s meaningful progress and an extension would be fair.
• Role Change Or Redeployment: If there’s a better‑suited vacancy and the employee agrees.
• End Employment: Follow a lawful process. This often involves a final meeting, an opportunity to respond, and written confirmation. Having the right termination documents prepared helps keep this step professional and legally compliant.

In some cases, if both parties agree, you might instead negotiate a mutual exit and document it through an employee separation agreement. Whether this is appropriate will depend on the circumstances and any legal risks identified.

Practical Tips To Make PIPs Work In A Small Business

• Keep It Simple: One page per concern is often enough. Clarity beats complexity.
• Focus On Outcomes: Define “what” success looks like rather than micromanaging the “how”.
• Build Accountability: Schedule check‑ins in your calendar and send brief follow‑ups in writing.
• Be Consistent: Use similar standards and timelines for similar roles to avoid claims of unfairness.
• Mind The Human Side: Performance conversations can be stressful. Maintain a calm, respectful tone and offer support services if you have them.
• Get Advice Early: If you’re unsure, it’s cheaper to get guidance before you act than to defend a claim later.

Key Takeaways

• A Performance Improvement Plan (PIP) is a structured, time‑bound plan that sets clear expectations, support and checkpoints to lift underperformance.
• Use a PIP after informal feedback hasn’t worked and when issues are ongoing, specific and capable of improvement.
• A fair PIP process includes evidence of concerns, measurable goals, regular check‑ins, genuine support and clear warnings if employment is at risk.
• Legal risks include unfair dismissal, adverse action and discrimination-procedural fairness and consistent documentation are essential.
• Choose the right path for the situation-PIP for underperformance, disciplinary steps for misconduct, capability processes for health‑related issues, or probation management for very new hires.
• Strong foundations-your Employment Contract, Workplace Policies, PIP template and the right process documents-reduce risk and make decisions more defensible.

If you’d like a consultation on drafting or running a performance improvement plan for your team, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.