When someone on your team isn’t meeting expectations, it can feel like you’re stuck between two bad options: tolerate the issue and hope it improves, or move quickly to termination and risk an unfair dismissal claim (or a broader workplace dispute).
This is where a well-run performance improvement plan (PIP) can really help. A performance improvement plan in Australia is not just “paperwork” - it’s a practical process that helps you set expectations clearly, give the employee a fair opportunity to improve, and create a reliable record of what was said and done.
Importantly, a PIP isn’t about “catching someone out”. Done properly, it’s a structured way to support performance, protect your business, and treat people fairly.
Below is a practical guide for small business employers on how to plan, run and document a performance improvement plan Australia employers can rely on.
A performance improvement plan (often called a PIP) is a documented process where you:
- identify performance concerns (what is not meeting the required standard);
- set clear expectations and measurable goals;
- provide support (training, tools, supervision);
- set a timeframe for improvement;
- hold check-in meetings; and
- record outcomes and next steps.
In Australia, there is no single “mandatory” PIP template required by law. However, if performance issues eventually lead to termination, Fair Work Commission decisions often focus on whether the employee:
- was told about the performance concerns clearly;
- was given a genuine chance to improve;
- had appropriate support; and
- was treated with procedural fairness (including warnings where appropriate to the situation).
So while a PIP is not always legally required, it is often one of the most practical tools you can use to demonstrate that your process was fair and reasonable.
When Should You Use A PIP (And When Shouldn’t You)?
A PIP is generally appropriate when the issue relates to underperformance, such as:
- missed deadlines or slow work output;
- consistent errors or poor quality work;
- not following processes (without deliberate refusal);
- customer service concerns; or
- role expectations not being met.
A PIP may not be the right tool where the issue is misconduct (for example theft, serious bullying, or serious safety breaches). Misconduct is usually handled through a disciplinary process and, in serious cases, may involve suspension or standing the employee down while you investigate - but only where you have a lawful basis to do so (for example, under the Fair Work Act, an applicable award/enterprise agreement, or the employment contract).
If you’re not sure whether you’re dealing with performance, misconduct, or a mix of both, getting early advice can prevent your process from drifting into risky territory.
Before You Start: Make Sure Your Foundations Are Solid
Many performance issues become legally complicated not because the employee “did nothing wrong”, but because the business did not clearly set expectations early on.
Before you launch into a performance improvement plan Australia employers should check these basics first.
1. Confirm The Employee’s Role And Expectations
Ask yourself: do you have a clear position description, KPIs (if relevant), and practical expectations that you’ve already communicated?
If the role itself has changed over time, or your expectations have increased due to business growth, it’s worth documenting that change and ensuring expectations are realistic for the role and classification.
2. Check The Employment Contract And Any Award/Agreement
Your Employment Contract should help set the baseline expectations (duties, reporting lines, location, hours, and performance obligations). It may also include:
- probation terms (if still within probation);
- policies that apply; and
- disciplinary or performance management clauses (in some cases).
You should also consider whether a Modern Award or enterprise agreement applies, as it may affect matters like consultation, classifications, and minimum standards. Even where it doesn’t dictate a PIP process, it can still shape what “reasonable management action” looks like.
3. Consider Whether There Are Underlying Health Or Workplace Issues
Performance issues sometimes have a non-obvious cause, such as:
- unclear training or onboarding;
- workload spikes or resourcing issues;
- bullying or conflict in the team; or
- a medical condition or mental health issue.
This doesn’t mean you can’t manage performance. It does mean you should proceed carefully - including considering your work health and safety (WHS) obligations and avoiding assumptions about what is driving the issue.
Below is a practical step-by-step PIP process that works well for small businesses and is aligned with what Australian employers are generally expected to do when managing performance fairly.
Step 1: Prepare Your Evidence And Examples
Before you speak with the employee, gather relevant information so you can have a clear, factual conversation. For example:
- specific dates of errors or incidents;
- examples of work that didn’t meet standards;
- customer complaints (if applicable);
- records of prior conversations or coaching; and
- expected standards (procedures, checklists, KPIs, position description).
Avoid relying on vague statements like “your attitude is bad” or “you’re not a good fit.” You’ll get a much better result (and a more defensible process) by focusing on observable facts and expectations.
This is where you explain the concerns and introduce the PIP process. Keep the meeting calm, structured, and respectful.
In the meeting, you should generally cover:
- What the concerns are (with examples)
- What standard is required (what “good” looks like)
- Why it matters (impact on customers, team, safety, quality, costs)
- What support will be provided
- What the next steps are (including a written PIP document)
- What may happen if performance doesn’t improve (for example, a formal warning, extension of the plan, role changes if appropriate and lawful, or termination)
It’s also usually a good idea to allow the employee to bring a support person (particularly if the meeting is formal or may lead to disciplinary outcomes). Even when not legally required in every situation, it can help demonstrate fairness.
Step 3: Put The Plan In Writing (Clear, Measurable, Time-Bound)
A strong PIP document should be easy to understand and difficult to misinterpret. As a guide, include:
- Summary of concerns (brief and factual)
- Performance objectives (what must improve)
- Measurement method (how you will assess improvement)
- Support/training (what you will provide)
- Check-in schedule (meeting dates)
- Timeframe (commonly 2-8 weeks, depending on the role and issue)
- Consequences if improvement doesn’t occur
Try to avoid goals that are too subjective, such as “be more proactive” (unless you define exactly what behaviours demonstrate this). Better examples might look like:
- “Reduce invoice processing errors to less than 2 per week for 4 consecutive weeks.”
- “Submit weekly job reports by 4pm each Friday with all required fields completed.”
- “Follow the customer complaint escalation process in 100% of relevant cases.”
Step 4: Provide Genuine Support (Not Just Deadlines)
A performance improvement plan in Australia should include meaningful support, otherwise it can look like the plan was designed to fail.
Support might include:
- refresher training;
- pairing with a more experienced team member;
- updated written procedures;
- more frequent supervision or feedback;
- adjusting workload while the employee learns; or
- setting interim goals to build momentum.
Also consider whether your workplace policies are up to date and consistent with your expectations. Clear workplace policies can help reduce “grey areas” when you’re managing behaviour and performance across the team.
Step 5: Run Regular Check-Ins (And Document Them)
Check-ins are where the PIP actually works. They keep the employee focused, give you the chance to coach in real-time, and prevent surprises at the end of the plan.
In each check-in, cover:
- progress against each objective (with examples);
- what has improved;
- what is still not meeting expectations;
- any further support required; and
- clear next steps before the next meeting.
After each meeting, send a brief written summary (email is fine) confirming what was discussed. This is often one of the most useful records if you later need to show you acted fairly and consistently.
Step 6: Close The Plan (Outcome Meeting + Next Steps)
At the end of the PIP timeframe, hold an outcome meeting and decide what happens next. Common outcomes include:
- Successful completion (performance is now meeting expectations)
- Extension of the plan (some improvement, but not enough yet)
- Formal warning (if performance remains unsatisfactory, noting warnings are not always required in every case but are often relevant for ongoing underperformance)
- Role adjustment (only where appropriate and lawful)
- Termination (if there is ongoing underperformance despite a fair opportunity to improve)
Whatever the outcome, document it clearly and keep it consistent with what you communicated at the start.
A PIP can protect your business - but only if it’s implemented properly. Here are some common pitfalls we see, and what you can do instead.
Using A PIP As A Shortcut To Termination
If the PIP is unrealistic, overly short, or doesn’t provide support, it can look like you never intended to help the employee improve.
Instead, set goals that match the role, the employee’s experience, and the nature of the issue. If you want improvement in complex duties, give enough time for change to genuinely occur.
Not Giving Clear Warnings Or Clear Consequences
Employees should not be left guessing about how serious the issue is.
Instead, be direct (but respectful) about:
- what must improve; and
- what may happen if it doesn’t.
Inconsistent Treatment Across Staff
If two employees have similar issues but only one is placed on a PIP (or one is treated much more harshly), you can create risk - including general protections or discrimination arguments, depending on the circumstances.
Instead, aim for consistency and keep records explaining why you took a particular approach (for example, differences in role, prior warnings, or the nature of the errors).
Sometimes a “performance problem” is actually a team conflict, poor management fit, or unclear reporting lines. A PIP may not fix those underlying issues on its own.
Instead, address relationship or communication issues separately where needed, and make sure your performance goals focus on the employee’s duties and outcomes (not personality clashes).
Ignoring Procedural Fairness
Procedural fairness generally means the employee is:
- told of the concerns;
- given a real opportunity to respond;
- given a genuine chance to improve; and
- assessed fairly and without predetermined outcomes.
In practice, this is one of the biggest reasons employers run a performance improvement plan in Australia in the first place - it helps you demonstrate that your process was fair.
What Documents And Policies Help Support A PIP Process?
A PIP is usually most effective (and least risky) when it sits within a broader system of clear contracts, policies and documentation.
Depending on your business and team, it can be helpful to review or put in place:
- Employment Contract: sets expectations around duties, reporting, and performance standards (and it’s easier to manage performance when these are clear from day one).
- Workplace policies: clarify standards around conduct, communication, performance, safety and confidentiality (and help you apply expectations consistently).
- Privacy documentation: if you’re keeping detailed performance records, you should think carefully about how you handle personal information and access controls, particularly if records are stored electronically. A Privacy Policy can be relevant where your business collects personal information and is required to provide a policy, but internal privacy practices, confidentiality obligations, and secure record-keeping processes are just as important for managing employee records appropriately.
- Separation documentation: if performance doesn’t improve and termination becomes necessary, you’ll want to ensure your exit process is compliant and carefully documented (a Separation Certificate may be relevant depending on the situation).
If you’re scaling and hiring more staff, it can also be worth reviewing your broader employment documentation and processes so performance management is consistent across the business.
Should You Use A Template PIP?
A template can be a good starting point, but you’ll still want to tailor it to:
- the employee’s specific role and duties;
- the issues you’ve observed (with examples);
- your business operations and policies; and
- any award-covered requirements that affect how you manage the employment relationship.
If your PIP reads like a generic form with “fill in the blanks” objectives, it can be harder to rely on later. A tailored approach is usually clearer for the employee and safer for you.
Key Takeaways
- A performance improvement plan Australia employers use should be clear, measurable, time-bound, and supported by genuine training or supervision - not just a warning in disguise.
- Before you start a PIP, make sure role expectations are clear, your documentation is in order, and you’ve considered whether there are underlying health or workplace issues.
- The best PIPs are run as a process: an initial meeting, a written plan, regular documented check-ins, and a final outcome meeting.
- Common legal risks include unclear expectations, inconsistent treatment, unrealistic timeframes, and failing to provide procedural fairness.
- Strong employment documentation and workplace policies make performance management easier, more consistent, and less likely to escalate into a dispute.
If you’d like help implementing a performance improvement plan in Australia or reviewing your employment documents and processes, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
