Are PIPs a ‘quiet firing’ tool for HR?

Performance improvement plans (PIPs) are often used by businesses that lack moral fibre to meaningfully address the performance concerns of an employee. However, law firm partners are ringing alarm bells on PIPs being used as a tool by HR to push employees out legally and safely.

In their purity, PIPs were manufactured to offer employees a path towards achieving goals and improving their overall performance. The process of a performance improvement plan often begins in a meeting with a manager or supervisor, where a structured timeline for improvements can be mapped out, which will ultimately benefit both the employee and the organisation.

Elizabeth Aitken, partner and national head of workplace relations and safety at SLF Lawyers, pointed out that PIPs can be a useful method to manage staff, only if the process is based on lawful performance concerns.

“It’s not unusual for the implementation of a PIP to precede ‘without prejudice’ or ‘off-the-record’ discussions with an underperforming staff member about a possible exit from the business,” said Aitken.

“PIPs can be an effective method to manage staff underperformance issues, so long as the PIP is based on lawful performance concerns and it is implemented in a reasonable manner. In the best case, the employee improves to the standard required for the role; in the worst case, it provides critical evidence of procedural fairness preceding a dismissal.”

From an employer’s point of view, a PIP can be the ‘without prejudice’ proposal for an employee who has seemingly disengaged with their job role and already has one foot out the door. Aitken offered an example of how this often plays out in regards to disengaged employees, yet she stressed that it should not involve any coercion for the employee to resign.

“It’s important that this approach does not involve any coercion of the employee to resign, or the employee could argue they’ve been ‘constructively dismissed’. Rather, an employer may wish to put a ‘without prejudice’ proposal like this when they feel like the employee has one foot out the door already or is alternatively facing reasonable and lawful performance management,” said Aitken.

“As an example, an employer might meet with an employee to discuss performance concerns and advise the employee of the decision to implement a formal PIP to address those concerns. At the same meeting, the employer might move into a ‘without prejudice’ discussion and make a proposal to the employee which involves an ex gratia payment in return for their resignation and a release from future claims.”

“An employee may be disengaged or, you know, they’ve been looking for other jobs. In these cases, when an employee knows the alternative is a formal PIP, they will often willingly take the ex gratia payment and resign by amicable agreement with the employer.”

For employees that don’t fit into the disengaged category, this process can leave them disgruntled because instead of them having that one foot out the door, it creates a feeling that their employer is instead pushing them out, and engaging in an act of quiet firing.

The practice of “quiet firing” is when employers deploy various tactics to create an environment that is so negative for an employee that they have no choice but to resign or leave the company on their own fruition. By implementing a PIP, HR teams are often subtly using this process to push an employee out under the guise of giving them a pathway towards improvement.

This “quiet firing” through the use of PIPs has left a number of former employees extremely frustrated.

Paul O’Halloran, partner and head of office at Dentons, shares this frustration with the process of PIPs, especially when they are implemented as a tool to axe an employee.

“I am not a fan of PIPs. While I am aware some clients use them extensively and some employment lawyers advise on them as a first course of action, in my experience, it is very rare for someone failing to live up to performance or conduct measures to succeed in a PIP,” said O’Halloran.

“The probationary period is an opportunity to test out competencies. If someone cannot cut it after six months (with sufficient support and direction), then they should be fired and put down as an error in the recruitment process.”

O’Halloran points towards poor performance management as a catalyst for the implementation of a PIP, which is often an attribute of conflict-avoiding employers who lack the moral fibre to simply be upfront with their employees.

“What I generally see is a convoluted process of performance management poorly executed, generally by risk-averse managers and conflict-avoiding employers,” said O’Halloran.

“I prefer a calculated without prejudice process whereby the poor performer is told things are not working out, and hypothetically, we can go through a disciplinary process, but there is a chance that may lead to termination of employment, so let’s talk a departure package if that is what they feel comfortable with.”

Legally, the process can be a foundation for minimising legal risks and costs for employers, absolving them from the ramifications of pushing an employee out. For this reason, O’Halloran calls into question the proverbial backbone of organisations that use this legal tool.

“Don’t get me wrong, certain employee attributes may require strengthening or coaching, but when I see PIPs, it’s usually because there is a lack of backbone to terminate an employee. I generally advise employers to cut out the paper shuffling and make tough decisions,” said O’Halloran.

“In most cases, the employer doesn’t even want the employee to pass the PIP; they want them to fail so they can terminate them.”

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.