Performance improvement plan (PIP): Rights, risks, and how to respond

A performance improvement plan (PIP) is officially designed to help employees improve their performance. In practice, however, it often serves as a warning sign – and can become the final step before a formal warning (Abmahnung) or even termination (Kündigung). If you’ve received a PIP, understanding your rights, your options, and the employer’s obligations is essential. This guide explains how to navigate a PIP, protect yourself, and avoid being unfairly labeled a “low performer.”

Key takeaways

• A PIP outlines clear performance goals, timelines, and potential consequences.
• You’re not legally required to sign the PIP – review it carefully first.
• Always document your work results and communicate clearly with HR.
• Unreachable or vague goals can make a PIP invalid.
• Seek legal advice early — a PIP can be used to justify termination later.

What is a performance improvement plan (PIP)?

A performance improvement plan (or performance improvement program) is a structured tool used by employers to address alleged performance or behavioral issues. Originating in the U.S., the PIP combines a warning with specific improvement steps and deadlines. In theory, it’s meant to help employees get back on track. In reality, it often precedes dismissal, especially for so-called “low performers.”

Performance Improvement Plans (PIPs) are increasingly used in Germany to document underperformance and justify potential disciplinary action. Typically, the plan sets measurable goals and deadlines for improvement. If these are not met, employers may rely on the PIP to support a behavior- or performance-based termination.

What are the goals of a PIP?

A PIP usually serves three main purposes:

1. Identify performance deficiencies.
2. Set clear expectations for future performance.
3. Warn of possible consequences if no improvement occurs.

The document often includes language such as: “Your signature confirms acknowledgment of performance issues and your commitment to meeting the PIP objectives.” A PIP can range from general recommendations to very specific allegations (e.g., failure to meet contractual obligations).

Employers may use a PIP in place of — or before — a formal warning. In such cases, the PIP effectively becomes your last chance to demonstrate improvement before stronger measures are taken.

What to do when you receive a PIP

Receiving a PIP is serious. It can significantly affect your employment status and future career. Follow these six key steps:

1. Don’t sign immediately

You are not required to sign a PIP on the spot. Ask for time to review it thoroughly. Signing can be interpreted as agreeing with the allegations. Request a reasonable review period and clarify unclear points. While you must generally follow the work instructions within the PIP, your signature is not mandatory.

2. Check for accuracy and specific allegations

Examine all statements carefully. Are the performance criticisms factual and specific, or vague and subjective? If you can disprove claims with data or records, collect that evidence. Inaccurate or unsubstantiated claims can invalidate the PIP.
For example: “You are difficult to manage” is too vague. But “On August 8, when ten reports were due, you submitted only two” would be a concrete, measurable criticism.
If necessary, submit a written response (Gegendarstellung) challenging false claims.

3. Communicate with HR and your manager

Schedule a meeting with HR and your supervisor to discuss the PIP in detail. Ask for specific examples of alleged underperformance and clarify what support will be provided. Seek transparency — and keep written records of all communications.

4. Evaluate goal feasibility

The objectives must be realistic and achievable within the set timeframe. Unrealistic goals (e.g., sales targets disconnected from market reality) may render the PIP invalid. If the workload is unmanageable, consider filing an “Überlastungsanzeige” (notice of excessive workload) to document the issue.

5. Document everything

Keep a written record of all relevant work outputs, emails, and feedback. Documentation is your best protection if the PIP later leads to disciplinary measures or termination.

Documentation is key — detailed records can be your strongest defense if your performance or behavior is later questioned.

6. Seek legal support early

A labor lawyer, works council (Betriebsrat), or union representative can help assess whether your PIP is fair and lawful. They can also ensure that you’re not being pressured into agreeing to unreasonable terms.

7. Consider legal expenses insurance

Because a PIP often signals that termination might follow, getting legal expenses insurance (Rechtsschutzversicherung) is highly recommended. It covers legal costs if you later need to file a wrongful dismissal claim.

Note that most insurers impose a three-month waiting period. Since PIPs usually run for 8–12 weeks, you may still be able to apply in time — but coverage may be denied if the dispute arises before the waiting period ends.

If you haven’t received a termination yet, now is the best time to secure legal insurance – before problems escalate.

When is a PIP unfair or disproportionate?

A performance improvement plan must always be proportionate – both in content and procedure. This means:

• Realistic goals: Targets must be achievable and measurable.
• Employer support: The company must offer reasonable help, such as training or regular feedback.
• Adequate time: Deadlines must allow for genuine improvement.

If the PIP’s true purpose is to push the employee out or apply psychological pressure, it may be deemed abusive. Such misuse can later invalidate a termination in court.

Possible consequences of a PIP

If you fail to meet the objectives, the employer may consider dismissal. However, the type of termination – and its legal justification – matters greatly.

Types of termination

• Performance-based termination (personenbedingte Kündigung): Applies if you are objectively unable to meet expectations despite effort and support. The employer must prove persistent inability to perform.
• Conduct-based termination (verhaltensbedingte Kündigung): Used when you could perform adequately but refuse to do so or ignore clear instructions.

Dismissal for “low performance”

Terminating someone for low performance is only possible after a formal warning and with solid evidence. General dissatisfaction is not enough. The employer must show, often through performance comparisons, that your output consistently falls at least one-third below the average of comparable colleagues.

The Federal Labor Court (BAG, 11 December 2003 – 2 AZR 667/02) ruled that underperformance of about one-third below average, sustained over time, may justify termination. But the employer must provide detailed comparative data – a burden that is often too high to meet successfully.

In practice, dismissals based solely on failed PIPs rarely hold up in court. Labor courts often side with employees when employers can’t prove a measurable and consistent decline in performance.

Challenging your dismissal usually pays off – German labor courts often favor employees when evidence of “low performance” is weak.

Frequently asked questions (FAQ)