You’ve been put on a performance management plan. Are you on the way out?

When roadside patrol mechanic Yep Yap was sacked in 2022, he’d been put on a performance management plan and failed to meet three key performance indicators.

But the Fair Work Commission found the targets set for Yap were unrealistic, unachievable and improper, ultimately forcing his employer, the company Club Assist, to reinstate him with back pay under unfair dismissal laws.

Performance management plans, also known as performance improvement plans (PIPs), have become common as a tool towards dismissing an employee. While meant as a genuine way to improve workers’ performance, they are increasingly being used as a tick-the-box exercise towards getting rid of people and still complying with unfair dismissal laws.

In fact, these laws – introduced more than 40 years ago to protect workers from arbitrary, unfair sackings – are what have made PIPs so popular in Australia, says Joydeep Hor of employment law firm People + Culture Strategies.

“There’s no hard and fast rule that says you have to have someone on a PIP before you can terminate their employment for performance reasons, but in the absence of one, there can be some questions asked,” Hor says.

So, what should you do if you find yourself on a PIP? How do they work? And what do managers need to know?

How does a performance management plan work?

When publicist Vivian (who did not use her real name because of concern about future employment prospects) was put on a performance management plan at a public relations agency in Sydney this year, it came as a surprise.

She was told not to mention it to colleagues, was given the option to negotiate a settlement instead and was told she had 24 hours to make her decision. The latter, she found out from a lawyer, was not a time frame the firm could hold her to.

Vivian had discussions with the firm’s HR department, her employment lawyer and her manager, and agreed on a set of key performance indicators. For the next few months, her performance was closely monitored.

Hor says PIPs are intended as a way to hold both employees and managers to account.

“The idea is that an employer should be actively working with a so-called ‘underperforming employee’ to help them improve their performance, using a plan which has metrics and timeframes,” he says.

However, the process is often treated as more of a set-and-forget process by managers, who Hor says should be setting expectations early and bringing up concerns informally first.

Does it mean you’re about to get sacked?

Vivian says getting put on a performance management plan initially felt like she was getting booted.

“The process felt micro-manager-y with regular reviews, but the KPIs weren’t hard to turn around, and I ended up passing it,” she says. “It was a bit awkward afterwards, but that didn’t last too long.”

TLB Law & Co senior associate Ellie Wolfenden says PIPs have, in some instances, become a tick-the-box exercise rather than a genuine effort to improve employee performance.

“It goes towards an employer demonstrating that the employee knew their performance wasn’t meeting the required standard, knew what the required standards were, and had been offered a fair opportunity to improve their performance,” she says.

Wolfenden says that in some situations, employers set benchmarks that are unreasonable or unrealistic.

“That’s when employees can feel that the process is not genuinely aimed at improving their performance, but rather is setting them up to fail,” she says. That can be stressful and troubling, but may also create a work health and safety risk the employer needs to manage, she says.

What should you do if you’re put on a PIP?

Hor says the first step is generally for employees to clarify why it is happening and exactly what is expected.

“If there’s anything ambiguous in terms of a target or a deadline, those things should be clarified in a conversation,” he says.

For employees who have been put on a PIP that feels unreasonable, Wolfenden says it can be worth seeking legal advice, clearly documenting why and how any given metrics may be unreasonable, and to weigh in on what they think is achievable.

“We’ve seen some performance management plans where sales tasks and targets are wholly out of proportion to the market and an employee is getting held to KPIs that no one in the business is meeting because of external market factors,” she says.

In Yap’s case, the employer’s decision to sack him was overruled because the performance metrics – including needing to aim for a particular rate of battery replacements under warranty – were seen as improper, and because many of the firm’s other roadside patrol officers had failed to meet their KPIs without being sacked.

Wolfenden says employees on PIPs should document when they are getting positive reviews or feedback from their broader team and external stakeholders, as well as circumstances outside their control that may impact their performance against requirements of the PIP.

Hor says employees who feel they are being managed out should have honest conversations with their managers. “If the employer is just going through the motions, that’s not very nice, and they shouldn’t be, but there may be opportunities to part ways on an agreed basis and short-circuit what could otherwise be a very unpleasant process for all involved,” he says.

Negotiating a mutual separation agreement can also be beneficial for the employer in that they can potentially avoid the time and resources involved in managing a PIP process.

“PIPs, when done properly, involve weekly check-ins and providing training and support to the employee to help them improve performance,” Wolfenden says. “It’s not meant to be a hands-off process.”

What do employers need to know about PIPs?

Hor says employers need to ensure the targets they set are clear, measurable and time-bound, with clearly outlined consequences.

Where a metric is subjective, he says the employer should provide details as to how that subjectivity will be assessed.

Wolfenden says while there are guidelines available from the Fair Work Ombudsman and theories of best practice from Fair Work Commission decisions and HR professionals, there are no clear regulations around conducting a PIP.

However, employers need to make sure PIPs are implemented in a lawful and reasonable manner, taking into account general work health and safety principles, and the health circumstances of the employee in question, she says: “There is no one-size-fits-all approach.”

Wolfenden says it is also important for employers to consider and account for factual matters outside an employee’s control, which may be affecting their performance.

Ultimately, she says performance management plans should be tailored to genuinely help employees improve.

“Using performance management or improvement plans with the aim of exiting the employee from the business, irrespective of performance improvement by the employee, undermines the purpose of such plans and can open the employer up to a claim,” she says.

Australian HR Institute chief executive Sarah McCann-Bartlett says employers also need clear documentation and processes around PIPs.

“It is now expected that all discussions are documented by the manager as evidence of these conversations and the supports for the employee to improve their performance having been put in place,” she says.

In the case of Yap, for example, the commissioner was concerned there was little documentation explaining the KPIs, or how they were calculated or measured.

McCann-Bartlett says there has been a shift recently with the Fair Work Commission requiring that PIPs be carried out reasonably.

“The commission has supported terminated employees in their attempts to challenge their termination through unfair dismissal hearings when they have been able to show inconsistencies between the actual process, the employer-employee discussions, what is stated in organisational policies and procedures, and the employee’s job description,” she says.

“With more awareness around psychosocial risk, there has been an increase in bullying claims as a result of employees being in a PIP process.”

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