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Performance improvement plans (PIPs) continue to be a thorn in the side of employees, with employers and HR teams regularly relying on them as a precursor to a termination.
The usual description attached to PIPs is that they offer employees a path towards achieving goals and improving their overall performance. The process of these plans often begins in a meeting with a manager or supervisor, where a structured timeline for improvements can be structured.
However, many employees across the globe and here in Australia have connected the dots between PIPs often being produced shortly before an employment termination. PIPs themselves have seen an increase in regularity, as according to a study by HR Acuity, 43.6 out of every 1,000 US workers had been on the receiving end of a PIP in 2023 – accumulating to a 30 per cent increase since 2020.
As resentment of PIPs grows, employers must be cautious when implementing them – as they can offer legal, image, and workplace moral issues if handled incorrectly.
HR Leader spoke to Karlie Cremin, managing director of DLPA, about PIPs and the impact they can have on employees and the workplace when overused or incorrectly implemented.
“PIPs are viewed as the first step in a firing plan because they often are – not always, but often. What I say to clients when this comes up is, if you don’t have a history of using them for actual performance improvement, and everyone can see historically that when someone goes on a PIP, their desk is vacant six weeks later, then don’t be surprised if people have connected the dots,” Cremin said.
“That said, the reason they are used that way is because we have legislation that makes it very difficult to have frank conversations about performance without risk of a variety of claims under Fair Work and other mechanisms. PIPs are most problematic in SMEs because the legislation calls for certain processes to be followed, and SMEs don’t often have frameworks 100 per cent supportive of those processes.”
“There is the small business Fair Dismissal Code, which is supposed to at least partially address this; however, in reality, it doesn’t because a small business is defined as less than 15 staff, which I think is a bit out of step with the market. This means that PIPs are a last resort – at which time actual performance improvement is much more challenging and much less likely.”
Amanda Lyras, partner at Clayton Utz, also touched on the perception of these plans from an employee’s point of view.
“Employees do often see PIPs as a precursor to termination of employment. The ‘unfair dismissal’ jurisdiction requires an employee to be given an opportunity to improve their performance before their employment is terminated, and PIPs can be used as a key strategy to comply with this requirement and mitigate claims risk,” Lyras said.
“The introduction of a PIP can be seen as an escalation of performance management and can make employees feel uneasy about their future with the business. For this reason, employers can, at times, be cautious about implementing them and may not do so in a timely manner so as to nip performance issues in the bud.”
“This can result in performance concerns becoming exacerbated and further breakdowns in the working relationship, which may mean a PIP is more likely to be treated as a mere formality and precursor to termination.”
“This does not benefit the employee, who may be deprived of a genuine opportunity to improve their performance, or the employer, who may have otherwise been able to avoid the steps and cost associated with termination of employment and any subsequent claims.”
Lyras gave a detailed layout of how a PIP should be properly implemented to ensure that it at least attempts to achieve its definitive purpose – rather than act as a pre-emptive firing tool.
“In order to be effective, a PIP should set out:
- “Clear expectations of the employee’s role, responsibilities, and required outputs;
- “How the process will be conducted and what support will be made available to the employe;
- “How the employee’s performance is being monitored;
- “The consequences of failing to meet expectations; and
- “A clear time frame for when performance improvements are expected to be seen.
“The PIP should be practical and provide the employee with a clear understanding of what is required to maximise the chance of rectifying any performance issues in order to allow the employment relationship to continue,” Lyras said.
Although Cremin believes PIPs can be used in an effective manner by organisations, she admitted that in the contemporary workplace, they may simply be a “necessary evil”.
“I would love to tell people: ‘If you just have open dialogue with your staff, you won’t need PIPs, and all will be well’,” Cremin said.
“However, that simply isn’t the case in the real world. Until we have legislation that is fit for purpose and allows performance to be discussed in an open, fair, and respectful way without disproportionate risk, PIPs will be a necessary evil, and most employees will understand what they are likely to lead to.”
Kace O'Neill
Kace O'Neill is a Graduate Journalist for HR Leader. Kace studied Media Communications and Maori studies at the University of Otago, he has a passion for sports and storytelling.
