How to create a performance improvement plan
A complete guide to creating effective PIPs that help underperforming employees succeed while protecting your business. Learn the process, essential elements, Fair Work compliance, and when to use PIPs.
Written by
Georgia Morgan
General information only – not legal advice
This guide provides general information about creating Performance Improvement Plans (PIPs) in Australia. It does not constitute legal, HR, or professional advice and should not be relied on as a substitute for advice specific to your business, workforce, or circumstances.
What is a performance improvement plan?
A Performance Improvement Plan (PIP) is a formal, structured process designed to help employees who are underperforming meet the required standards of their role. Unlike disciplinary warnings, a PIP is fundamentally a support tool aimed at employee development and improvement.
PIPs document specific performance gaps, set clear improvement goals, outline the support provided by the employer, and establish a timeframe for improvement. When done properly, a PIP gives employees a genuine opportunity to succeed while providing employers with a clear record of the performance management process.
Important: Fair Work perspective
The Fair Work Commission expects employers to give employees a genuine opportunity to improve before terminating for performance. A PIP should be a sincere attempt to help the employee succeed, not just documentation to justify dismissal.
In Australia, performance management is regulated under the Fair Work Act 2009. Employers must follow fair processes, provide reasonable opportunities for improvement, and ensure termination (if it occurs) is not harsh, unjust, or unreasonable.
When to use a performance improvement plan
A PIP is appropriate when an employee's performance (not conduct) consistently falls below acceptable standards despite informal feedback. Consider implementing a PIP when:
- Performance issues are ongoing – The employee has not responded to informal coaching or performance reviews
- The role is salvageable – You believe the employee can improve with proper support and structure
- Issues are capability-related – Skills gaps, output quality, work speed, or meeting deadlines
- Previous feedback has been documented – You've already had conversations and given the employee chances to improve informally
- You're willing to provide support – You can offer training, resources, mentoring, or other genuine assistance
PIPs work best when both parties approach the process constructively. The employee must be willing to engage, and the employer must genuinely provide the support promised. If either party is simply going through the motions, the PIP is unlikely to succeed.
PIP vs. warning letter: What's the difference?
Many employers confuse PIPs with warning letters or use them interchangeably. However, they serve different purposes and should be used in different situations. Here's how they differ:
| Aspect | Performance Improvement Plan | Warning Letter |
|---|---|---|
| Purpose | Support and develop employee to meet performance standards | Disciplinary action for policy breaches or misconduct |
| Use case | Ongoing performance gaps (skills, output, quality) | Specific conduct violations (lateness, policy breach) |
| Tone | Supportive and developmental | Formal and corrective |
| Duration | 4-12 weeks with regular check-ins | Active for 6-12 months (as per policy) |
| Support | Training, coaching, resources provided | Employee expected to self-correct |
| Outcome | Employee improves or employment ends | Warning expires or escalates to next level |
Quick decision guide:
- Use a PIP when someone is trying hard but not meeting performance standards (skills, output, quality)
- Use a warning when someone violates policy or workplace conduct (lateness, attendance, behavior)
- Can use both if performance issues exist alongside conduct problems, but address them separately
What to include in a PIP
Every effective PIP should include these eight essential components:
Performance issues
Clear, specific description of what isn't meeting expectations
Expected standards
What good performance looks like in this role
Improvement goals
Specific, measurable objectives the employee must achieve
Timeframe
Duration of the PIP (typically 4-12 weeks)
Support provided
Training, coaching, resources, or adjustments you'll offer
Review schedule
When and how progress will be assessed
Consequences
What happens if improvement isn't achieved
Signatures
Employee acknowledgment and manager approval
Free PIP template
Save time with our pre-built Performance Improvement Plan template. Includes all essential sections, guidance notes, and Fair Work compliance tips.
Download PIP templateThe PIP process in 6 steps
Follow this structured process to create and manage an effective Performance Improvement Plan:
Identify and document the performance issues
Clearly define what performance problems exist and gather evidence before creating a PIP.
- Be specific about what standards aren't being met
- Collect evidence: missed KPIs, quality issues, feedback
- Review any previous informal feedback or performance reviews
- Ensure the issues are about performance, not conduct
Meet with the employee before finalising the PIP
Discuss the performance concerns and give the employee a chance to respond.
- Explain the specific concerns clearly
- Ask if there are factors affecting their performance
- Listen to their perspective genuinely
- Advise they can have a support person present
Draft the PIP document
Create a formal document outlining expectations, support, and review points using our PIP template.
- State the performance gap clearly
- Define specific, measurable improvement goals
- Set a realistic timeframe (usually 4-12 weeks)
- Outline the support you will provide
Meet to present the PIP
Present the PIP formally, explain it thoroughly, and answer questions.
- Walk through each section of the PIP
- Ensure the employee understands what's expected
- Confirm the support and resources available
- Have them sign to acknowledge receipt (not agreement)
Implement regular check-ins
Meet frequently to review progress, provide feedback, and adjust support if needed.
- Schedule weekly or fortnightly check-ins
- Document progress at each meeting
- Provide positive feedback when improvement occurs
- Identify barriers and offer additional support
Conclude the PIP with a formal review
At the end of the period, formally assess whether goals were met.
- Review against each goal in the PIP
- If successful: confirm the PIP is complete, acknowledge improvement
- If partially successful: extend the PIP or adjust goals
- If unsuccessful: proceed with further action as warned
PIP do's and don'ts
Avoid common mistakes by following these best practices:
| Do | Don't |
|---|---|
| Set achievable, measurable goals | Make goals vague or impossible to meet |
| Offer genuine support and resources | Use PIPs just to build a termination case |
| Check in regularly and provide feedback | Set and forget until the end date |
| Document all discussions and progress | Rely on memory for what was said |
| Consider underlying causes | Ignore health, workload, or other factors |
| Recognise improvement genuinely | Move goalposts when employee improves |
When NOT to use a performance improvement plan
While PIPs are valuable tools, they're not appropriate for every situation. Using a PIP in the wrong circumstances can waste time, create false expectations, or expose your business to legal risks.
Avoid using a PIP in these situations:
Serious misconduct
Theft, fraud, violence, or serious policy breaches warrant immediate warnings or termination, not a PIP.
Better alternative:
Follow disciplinary process: investigate, warn, or terminate as appropriate.
Probation periods
Employees on probation already have performance expectations set.
Better alternative:
Address issues through probation review meetings and end employment if unsuitable.
Redundancy situations
If the role is no longer required, a PIP won't change that.
Better alternative:
Follow redundancy process: consult, consider alternatives, provide notice.
Workplace bullying or harassment
These are conduct issues requiring investigation, not performance management.
Better alternative:
Conduct a workplace investigation and take disciplinary action.
Cultural fit issues
If someone simply doesn't align with your workplace culture, a PIP is inappropriate.
Better alternative:
Have honest conversations and consider whether the role is right for them.
Industry-specific PIP considerations
Different industries have unique performance requirements and workforce characteristics that affect how you design and implement PIPs. Here's guidance for common industries:
Hospitality
- Focus on customer service metrics, speed, accuracy
- Consider seasonal fluctuations when setting timeframes
- Address shift punctuality and reliability specifically
- Link to hospitality rostering for shift management
Healthcare
- Patient safety and care standards are paramount
- Clinical competency may require longer improvement periods
- Consider registration/licensing requirements
- Use healthcare workforce management tools
Retail
- Sales targets and customer interactions measurable
- Stock management and cash handling accuracy critical
- Peak trading periods affect availability for training
- Track with retail rostering software
Childcare
- Ratio compliance and child safety non-negotiable
- Developmental approach to interactions with children
- Qualifications and ongoing professional development
- Manage with childcare rostering systems
Fair Work compliance and legal considerations
Under Australian employment law, employers must follow fair and reasonable processes when managing performance. The Fair Work Commission considers several factors when assessing whether a dismissal following a PIP was fair:
Key Fair Work requirements:
- Valid reason: The performance issue must be genuine and substantial
- Notification: The employee must be clearly told about the performance concerns
- Opportunity to respond: They must be given a chance to explain or defend their performance
- Opportunity to improve: A reasonable timeframe and support must be provided
- Warning about consequences: The PIP should clearly state what happens if improvement doesn't occur
- Support person: The employee can have a support person present at meetings
Protecting against unfair dismissal claims
To reduce the risk of unfair dismissal claims, ensure your PIP process includes:
- Written documentation of all performance concerns and discussions
- Specific, measurable goals that are achievable within the timeframe
- Genuine support and resources (not just token gestures)
- Regular, documented check-ins with constructive feedback
- Consistent application of performance standards across all employees
Free templates and resources
Access our complete library of performance management templates and tools:
PIP template
Pre-built Performance Improvement Plan document with all essential sections.
Download templatePerformance review template
Conduct regular performance reviews before issues escalate to PIPs.
Download templatePerformance management policy
Establish your organisation's approach to performance management.
View policyWarning letter template
For conduct issues that require disciplinary warnings instead of PIPs.
Download templateFrequently asked questions
- A PIP is a formal document that outlines an employee's performance issues, sets clear improvement goals, establishes a timeframe, and specifies the support provided and consequences of not improving. It's a structured way to help underperforming employees succeed while documenting the process.
- Use a PIP when an employee's performance consistently falls below expectations despite informal feedback and documented performance reviews. PIPs are for ongoing performance issues, not one-off mistakes or conduct issues (which may require different processes like warning letters).
- Typically 4-12 weeks, depending on the complexity of the improvements needed. Simple skill gaps might need 4-6 weeks. Complex behavioural or capability issues may need 8-12 weeks. The timeframe should be realistic for achieving the goals.
- A PIP is primarily a support tool, though it does typically include consequences (further action, up to termination) if improvement doesn't occur. Some organisations issue a PIP instead of a warning; others issue a warning first, then a PIP. Follow your policy consistently.
- For straightforward performance issues, a PIP following your documented process is usually sufficient. However, seek advice if: the employee has raised discrimination concerns, there are health/disability factors, the person is a long-term employee, or you're unsure about the process.
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RosterElf HR Hub helps you document and track performance improvement plans with clear audit trails. Built for Australian small businesses.
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