A recent Fair Work Commission ruling shows that rushing a Performance Improvement Plan or skipping steps creates immediate legal risk. An employment lawyer outlines how to design a PIP that stands up to scrutiny.
A recent Fair Work Commission (FWC) ruling serves as a stark warning for employers: even when dealing with a underperforming employee, failing to follow the formal Performance Improvement Plan (PIP) process creates immediate legal exposure.
In the decision, an employer faced harsh scrutiny after terminating an employee’s PIP eight days early and failing to properly log required coaching sessions. Deputy President Masson explicitly noted that cutting the PIP short introduced “an element of unjustness” into the process.
While the employer ultimately defeated the unfair dismissal claim due to 15 months of severe underperformance, the case demonstrates how easily procedural mistakes can jeopardise a termination.
Rushing timelines, failing to document support, or treating a PIP as a box-ticking exercise opens the door to significant legal risk.
Where performance improvement plans go wrong
A PIP should give an employee a genuine opportunity to improve, explains Amy Zhang, Executive Counsel & Team Leader at Harmers Workplace Lawyers.
“Without that reasonable opportunity, the Commission will find there’s been no procedural fairness, making the dismissal unfair, even with a valid reason and genuinely poor performance.”
The most common mistake with PIPs, she says, is adopting a ‘one-size-fits-all’ approach.
“Companies come into trouble when they don’t adapt the PIP to the specific circumstances, or give enough time, guidance or resources for proper improvement.”
Here are some non-exhaustive tips to make a PIP fair, compliant and effective.
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Set an achievable deadline
There’s no fixed length for a PIP — it needs to give the employee a reasonable opportunity to improve.
A month is common, but complex or senior roles may need more time such as 60 or 90 days.
“A PIP has to be tailored to the role and the performance issues,” says Zhang. “A salesperson, for example, may need three months to develop leads and build a pipeline before results show.”
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Determine the support on offer
A compliant PIP can’t be positioned as a list of demands. It should specify clear expectations and outline how the company will support the employee to meet them, whether through training, shadowing a colleague, or a reduced workload.
“You want to be specific about the performance issues, the KPIs the employee needs to achieve, and the support the company will provide,” says Zhang.
“Employees should also be forewarned that dismissal could be a consequence if they don’t pass the PIP.”
“A PIP has to be tailored to the role and the performance issues. A salesperson, for example, may need three months to develop leads and build a pipeline before results show.” – Executive Counsel & Team Leader, Harmers Workplace Lawyers.
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Know when it’s not a capability issue
PIPs are for performance issues – an employee genuinely struggling to execute the role. Poor behaviour, wilful misconduct or a breach of protocol calls for a disciplinary process instead.
If mental health is affecting performance, employers need to tread carefully to avoid discrimination risk, says Zhang.
“A different approach may be required, so consultation is important to get to the root of the issue.”
Employers must also be mindful that PIPs can be gruelling.
“We’re commonly seeing employees go on sick leave once they’re put on a PIP, because it’s incredibly stressful.”
This creates uncertainty for employers. Usually the PIP would be paused until the employee returns, with support and counselling offered throughout. But it’s worth getting external legal advice in this situation, she adds.
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Set clear, regular check-ins – and keep them objective
Employees need contact and in-person support during the PIP.
Regular check-ins – perhaps once a week – give the employee real-time coaching while enabling the business to track progress.
“These meetings are also an opportunity to provide support and feedback, so the employee can genuinely improve,” says Zhang.
Feedback should be measured against specific, pre-agreed criteria tied to the role, not impressions of attitude or “mindset”.
Notes, work samples and measurable outcomes hold up better under scrutiny than a manager’s general sense that things haven’t improved.
Zhang adds that building in flexibility can make the process more fair.
“An employer can take a staged approach, recognising it may take time to reach a certain standard. This would reflect a genuine effort to help the employee meet the KPIs.”
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Offer a genuine opportunity to respond
This is where the employer in the case above fell short.
Under the Fair Work Act, employees must be told the actual reasons being considered for dismissal and given a real chance to respond – not simply informed of a decision already made.
“If they don’t pass the PIP, they should be told why, and given the exact reasons they may be terminated,” says Zhang. “A brief show-cause process of up to a week should then follow, which then gives the employee a chance to respond before any decision is made.
“It’s advisable to get external legal advice at this stage, because termination is often where things go wrong.”
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Document the outcome
Courts and tribunals look at whether a PIP was a genuine attempt to help, or a predetermined path to exit dressed up in process. A clear contemporaneous record and audit trail is the best protection, says Zhang — every meeting, warning and outcome should be recorded as it happens, not reconstructed afterwards.
“File notes and other written documents showing what feedback was given, what support was provided, and what opportunities the employee had to improve is critical.”
The red flags that a PIP is simply a way to get rid of someone are easy to spot, she adds.
“This may be a PIP that’s rushed, vague or procedurally unfair, like giving only three days to improve with no specifics on what’s wrong. That suggests the PIP isn’t genuine.”
🧰 HR resource toolkit
- Course: Investigating workplace misconduct
- Member benefit: Download AHRI’s Performance Improvement Plan template in the AHRI Assist library to clearly identify performance gaps, set measurable expectations and track progress towards improvement.
- Article: creating a reasonable management action
- Article: common questions on managing underperformance.
