Performance Improvement Plan – Now what?

A Performance Improvement Plan (PIP) is – in theory – an indication of performance weaknesses and a plan for improving your performance on the job. However, it can also be a milestone before a dismissal. Employees should know that – and make sure that a Performance Improvement Program sets clear and realistic goals and deadlines to improve and document their performance. But what rights do employees have, and how should they react if they receive a Performance Improvement Plan (PIP)? Our blog article has everything you need to consider and thus avoid legal pitfalls – including the dismissal as an (alleged) “low performer”.

Key points:

• What is a PIP: A performance improvement plan (PIP) is a document that aims to “help” employees who are not meeting performance goals to improve their job performance
• Purpose of a PIP: Purpose is to improve employee performance – but in fact often also to prepare a dismissal if the goals set in the PIP are not met.
• Rights of employees: Under German labor law, it is not mandatory to sign a PIP. However, you should follow the instructions. You can respond or take legal action if the targets are unrealistic or the accusations are false.
• Legal consequences: A PIP can be the basis for a dismissal for personal or behavioral reasons, but it must be in line with principles of German labor law.
• Practical tips: Document your performance, get legal advice and talk to HR, the works council and supervisors – consult a legal expert, if necessary.

What is a Performance Improvement Plan (PIP)?

A Performance Improvement Plan (PIP) is a document that companies use to “help” employees improve their performance. As the concepts suggests, the PIP originally comes from the US, where it has been a widespread instrument for many years, used to give employees a last chance to improve their performance. Typically, the PIP contains a mixture of warning and concrete plan with recommendations for action and milestones to get out of a (supposed) performance low. At least, that’s the theory. In practice, of course, even in the US, the PIP is very often followed by termination of employment. And of course, the rules in the US are very different from those in Germany.

Performance Improvement Plans are becoming more and more common in Germany as well, as a way of addressing an employee’s (performance or behavioral) issues. In practice, PIP often comes into play as preparation for a behavioral dismissal due to “low performance”.

What are the goals of a PIP?

The PIP typically has three objectives:

1. It draws attention to existing performance deficiencies,
2. sets clear expectations for future performance, and
3. warns of possible legal consequences if improvements do not occur.

Often, a Performance Improvement Plan contains the following sentence: “By signing this, you acknowledge your performance issues and your intention to fulfill the conditions of the PIP.” A Performance Improvement Program includes specific performance targets and deadlines by which the employee must improve their work performance. The content can range from general suggestions for improvement to very specific allegations, such as when contractual obligations have not been fulfilled.

A PIP is sometimes used in conjunction with or as a precursor to a warning letter. If the employer believes that the work performance is inadequate, a PIP could be the preliminary step. The PIP offers the employee a last chance to improve their performance before facing tougher measures such as a dismissal for personal or behavioral reasons.

What should employees do if they receive a Performance Improvement Plan?

If you receive a Performance Improvement Plan (PIP), it is crucial to proceed in a planned and proactive manner. Since a PIP can have a significant impact on the employment relationship, the PIP should not be underestimated. Here are the most important 6 tips to keep in mind:

1. Don’t sign (immediately): At least, ask for some time to review the PIP. Think carefully about whether you agree with the statements in the PIP.
2. Check the PIP for accuracy: Review the accusations and performance evaluations.
3. Check the attainability of goals: Are the requirements and deadlines realistic and clear?
4. Documentation and evidence: Keep a written record of all measures and successes.
5. Communication with HR and management: Clarify any unclear points and request specific examples.
6. Legal assistance: Consult a lawyer, the works council or a trade union.

In detail, this means the following:

1. Do not sign immediately

Do not sign the Performance Improvement Plan – at least not immediately. Instead, ask for time to consider the plan. A PIP may have far-reaching consequences, so it is advisable to get an overview first and clarify any ambiguities. Ask for a reasonable amount of time to review the document before commenting on it.

2. Check the PIP for accuracy and clarity of the allegations.

Carefully review the specific allegations and evaluations of your performance. To counter a PIP claim, you should request specific evidence or provide evidence that refutes the claim. By demonstrating that your performance has not diminished, you may call into question the basis of the PIP. In cases of false allegations, you should consider submitting a “counterstatement“.

Important: “You’re difficult to work with” or “You’re slow.” is not considered as specific evidence. Rather, it should be, “On August 8, when I asked all team members to submit 10 reports, you only submitted 2,” or something similar.

3. Communicate with HR and your manager

It is crucial that you engage with both HR and your manager. Set up a meeting to discuss the PIP in detail and ask to see examples of the underperformance it alleges. Ask for specific, measurable examples so you can understand the allegations. Also clarify what support you will be offered to achieve the targets that have been set.

4. Check the targets for achievability

Make sure that the targets set in the PIP are clear, realistic and achievable within the given deadlines. If, for example, sales figures are unbelievable, do not agree to them. No matter, what the internal budget or forecast says. Then, the target is not feasible, and you should address this. In such cases, it can be helpful if you report a “work overload” to document the fact that the requirements are too high.

5. Documentation and evidence

Document all relevant evidence of your work results and meeting content. Comprehensive documentation protects you from possible false accusations and enables you to present clear evidence later.

6. Get legal support

Seek legal advice early. A specialized employment lawyer or works council representative can help you critically examine the PIP and ensure it is not being used as a tool to prepare for termination. Legal counsel can also ensure your rights as an employee are being protected and you are not being unfairly pressured.

When is a PIP unrealistic?

The PIP must be proportionate in both content and timeline. This means:

• Realistic goals: The goals of the PIP must be achievable for the employee and not overly demanding.
• Support from the employer: The employer must provide the employee with the necessary support, such as training, clear objectives and regular feedback.
• Reasonable deadlines: The deadline for meeting performance targets must be set so that the employee has a real chance of improving.

A employer must not use a Performance Improvement Program to provoke an employee’s termination or to put the employee under unreasonable pressure. Such practices could be considered an abuse of rights in the event of termination.

What are the consequences of a Performance Improvement Plan?

There could be serious consequences, including dismissal, in case of failure to achieve the goals set in the PIP.

Types of dismissal

It is important to distinguish between different types of dismissal and to know the exact requirements and deadlines.

• Dismissal for personal reasons: This type of termination is applicable when the employee is permanently unable to perform the required services. The employer must prove that despite all support and efforts, there has been no improvement.
• Dismissal for behavioural reasons: If the employee has the skills but deliberately fails to perform or follow instructions, then a dismissal for behavioral reasons could be a possibility.

Dismissal due to poor performance

Dismissal for poor performance (“low performance”) is generally possible as a so-called dismissal for misconduct in the event of underperformance, but only after a prior warning letter. It is not enough for the employer solely to claim underperformance; they must prove in court that the employee is performing significantly worse than their colleagues.

According to the Federal Labor Court (Bundesarbeitsgericht, BAG), a performance deficiency is usually significant if an employee performs at least one-third below the average of comparable colleagues over a longer period of time (BAG, dated December 11, 2003, Az: 2 AZR 667/02). The employer must present and document the performance of the employee concerned in detail in relation to other employees. In practice, this burden of proof is often difficult to meet, which is why terminations on this basis almost always fail.

A PIP can lead to a termination, but the employer must meet very strict requirements in order to successfully justify this termination in court. In many cases, employees win their cases if there is no sufficient documentation of the termination

FAQ: Performance Improvement Plan

Here are answers to some of the common questions employees have about the Performance Improvement Program (PIP):

Is it mandatory to sign a PIP?

It is not mandatory for you to sign a PIP. However, the PIP still counts as a work instruction, even without your signature. It is advisable to request a cooling-off period, to check the content carefully and, if necessary, to discuss it with a lawyer before you sign anything.

What support must my employer provide?

Your employer must provide you with reasonable support to improve your performance. This could be in the form of training, clear objectives or regular feedback. The support should aim to help you achieve the set goals.

Can I take action against a Performance Improvement Plan?

Yes, you can take action against a PIP if you believe the allegations or targets are unfair or unachievable. It is important to raise these concerns early and to document your position. You should consult the works council or a labor lawyer.

How does a Performance Improvement Plan work?

A PIP is a formal plan that identifies performance issues and sets clear expectations for improvement. It includes specific goals, deadlines and actions that the employee must fulfill. Regular feedback is often part of the PIP process.

What happens if I don’t meet the goals of the PIP?

If you fail to meet the goals of the Performance Improvement Plan, this could lead to a warning letter or dismissal, depending on the severity of the performance issues. However, the employer must prove that the PIP was fair and that you received enough support.

Can a Performance Improvement Plan lead to dismissal?

Yes, a Performance Improvement Plan can lead to a dismissal, but certain conditions must be met for this to happen. For a dismissal based on conduct due to poor performance, the employer must prove that the employee has worked significantly worse than their colleagues over a longer period of time. This is extremely difficult for an employer to prove, as the employer must provide detailed evidence and comparative documentation over a representative period of time. Such terminations often fail in court.

How do I act if I think the targets are unrealistic?

If you think the targets in the PIP are unachievable or unfair, you should address this immediately and document it. It may also be advisable to make a formal overload report or to consult the works council and legal advice.