Performance Improvement Plans In New Zealand: A Guide For Employers Who Actually Want Improvement

A performance improvement plan should help an employee succeed. When the standards are vague, the process begins too late, or the person judging performance is involved in a workplace conflict, it can become the foundation of a costly personal grievance.

For many employees, the words “performance improvement plan” are not reassuring.

They hear them and immediately begin updating their CV. Often, they have good reason to.

A performance improvement plan, usually called a PIP, is supposed to identify concerns, explain the standard required and give an employee a genuine opportunity to improve. Yet, in practice, some plans appear only after the relationship has deteriorated and the employer has already decided that the employee needs to go.

The concerns are sometimes vague. The standards can be subjective. The support promised is limited to a weekly meeting at which the employee is told, again, that their performance is “not at an acceptable standard”.

And who decides what is acceptable? Occasionally, it is the same manager with whom the employee has an acrimonious history.

That is a difficult foundation on which to build a fair assessment, and an even more difficult one on which to justify a dismissal.

For employers, the answer is not to avoid managing performance. It is to start earlier, establish clear expectations, investigate the causes of any shortfall and ensure that the employee has a real opportunity to succeed.

A PIP Should Not Be A Surprise

One of the most common problems with performance management is that it starts too late.

A manager may have been dissatisfied for months, perhaps discussing the employee’s alleged shortcomings with colleagues while saying little to the employee. Eventually, frustration boils over and a formal plan appears.

From the manager’s perspective, the problem has been obvious for a long time. From the employee’s perspective, the plan may come out of nowhere.

That gap matters.

An employee cannot correct a problem they do not know exists. Nor can they be expected to infer a manager’s private expectations from an occasional sigh, a terse email or a general comment that they need to “step up”.

Employment New Zealand recommends raising concerns early and generally using informal measures before moving to formal performance management. Those measures might include coaching, clearer instructions, additional training or regular conversations about the work. Employment New Zealand

This does not mean that every concern must follow an identical sequence. The appropriate response will depend on the circumstances. However, if an employee’s first meaningful indication that their work is unsatisfactory arrives in a formal PIP, the employer should ask why.

Start With A Conversation

Before preparing a formal plan, a manager should be able to explain:

• What work is causing concern.
• When the problem occurred and how often.
• What standard the employer expected.
• How the employee’s work fell short of that standard.
• Whether the expectation was communicated clearly.
• What the employee says about the issue.
• Whether training, workload, systems or management contributed.

The conversation may reveal that the employee misunderstood the task. It may reveal that the employee has been working with inadequate information, insufficient training or competing instructions.

It may also reveal that the manager’s expectation was never particularly clear in the first place.

That is useful information. Discovering the real problem early gives the business a chance to fix it before an ordinary management issue becomes a formal dispute.

“An Acceptable Standard” Is Not A Standard

A phrase like “work must be completed to an acceptable standard” sounds reasonable until someone asks the obvious question:

What does acceptable mean?

If the answer is “the manager will know it when they see it”, the employee is being asked to meet a moving target.

Consider these two objectives:

Vague: Improve the quality of your customer communications to an acceptable standard.

Clearer: During the next six weeks, respond to new customer enquiries within two working days, unless the manager has approved an extension. Responses should address the customer’s main question and use the company’s current response template. The manager will review a sample of five responses each week and provide specific feedback.

The second objective is not perfect for every workplace. A target of two working days may be unrealistic if the employee has an excessive workload or depends on information from someone else. But it gives both parties something concrete to discuss.

A useful objective identifies:

1. The work: What task or conduct is being assessed?
2. The standard: What does satisfactory performance look like?
3. The evidence: How will performance be measured?
4. The timeframe: When will progress be reviewed?
5. The support: What will the employer provide?
6. The assessor: Who will evaluate the work, and how?
7. The context: What factors outside the employee’s control will be considered?

Not every aspect of a job can be reduced to a number. Communication, judgment and professional conduct often require qualitative assessment. That makes examples and explanations more important, not less.

If a manager considers a report inadequate, they should identify the passages that concern them and explain what would have made the report satisfactory. “Poor quality” by itself tells the employee very little.

Check The Employment Agreement Before Setting Targets

A PIP should be grounded in the employee’s actual role.

That means looking at the employment agreement, any relevant job description, established policies, communicated expectations and the work the employee has been asked to perform.

A recurring problem is the sudden appearance of a new performance standard that does not reflect what the employee was hired to do, what they have previously been told, or the resources they have been given.

For example, an employee hired to administer client accounts may be placed on a plan requiring them to generate a specified number of new sales leads. If sales were never part of their agreed role, the employer needs to think carefully before treating failure to achieve that target as poor performance.

This does not mean that every reasonable performance expectation must be written into the employment agreement word for word. Employers can generally give lawful and reasonable instructions, and expectations may develop as a role develops.

But there is a difference between clarifying a reasonable expectation within a role and using a PIP to impose a substantially different job. Where a proposed change affects contractual duties or other agreed terms, the employer should consider whether consultation and agreement are required.

The question is straightforward: Can the employer explain where the standard came from, why it is reasonable and how the employee was made aware of it?

If the answer is no, the problem may lie with the plan rather than the employee.

The Standard Must Be Achievable In The Real Workplace

A target can be clear and still be unfair.

Suppose a customer service employee is required to resolve 95% of enquiries within one working day. The target is measurable. It may also be impossible if the employee must wait three days for another department to approve most responses.

Similarly, a sales target tells only part of the story if the employee has inherited an undeveloped territory, received fewer leads than their colleagues or been assigned customers who are leaving for reasons outside their control.

Before setting a target, employers should consider:

• The employee’s actual workload and working hours.
• The quality of available systems and equipment.
• Whether necessary information is accessible.
• Dependencies on other staff, customers or suppliers.
• The employee’s experience and training.
• How comparable employees are assessed.
• Whether the target has previously been communicated or applied.
• Whether the employee has enough opportunity to demonstrate improvement.

Comparisons with colleagues can be useful, but they need context. Two employees with the same job title may have very different customer portfolios, workloads, resources or levels of support.

And if the business is understaffed, has poor systems or routinely gives contradictory instructions, those are management problems. They should not be repackaged as an individual employee’s failure.

Support Means More Than A Weekly Meeting

A performance improvement plan is supposed to improve performance. That requires the employer to consider what the employee needs in order to meet the standard.

Depending on the issue, support might include:

• Training on a particular system or task.
• Clear written instructions or examples of satisfactory work.
• Coaching from an experienced colleague.
• Additional supervision or timely feedback.
• Access to information or equipment.
• A temporary adjustment to workload.
• Clarification of competing priorities.
• Time to practise a new skill.

A weekly meeting can be useful, but a meeting alone does not necessarily solve the underlying problem. If the employee does not know how to use a system, meeting every Friday to discuss their inability to use it is unlikely to produce a miracle.

Support should also be specific. “Training will be provided” is a fine sentiment, but the plan should say what training, who will provide it and when.

Employment New Zealand describes a PIP as a forward-looking process that should give employees clear, practical steps, a realistic timeframe and appropriate support. Employment New Zealand

The Employer Has Obligations Under The Plan Too

It is easy for a PIP to read like a list of everything the employee must do, with little attention paid to the employer’s responsibilities.

If the plan says the manager will provide training by the end of week one, that training needs to happen. If it says feedback will be supplied after each review, feedback should be supplied in time for the employee to act on it.

If the promised support does not materialise, the employer should not simply mark the employee down for failing to improve. The plan may need to be adjusted, including extending the timeframe where appropriate.

A fair review asks two questions:

1. What did the employee do?
2. What did the employer do to make improvement possible?

When The Manager Is Part Of The Problem

Performance management becomes particularly difficult when the person evaluating the employee is involved in a serious workplace conflict with them.

That might be a manager against whom the employee has made a bullying complaint. It might be someone who has had a lengthy personal dispute with the employee, or whose own conduct is relevant to the performance concerns being raised.

The existence of conflict does not automatically mean the manager’s concerns are false. Nor does it mean an employer must ignore genuine performance issues.

It does mean the employer should think carefully about how the assessment will be conducted.

If the same person identifies the problem, defines the standard, controls the evidence and decides whether the employee has succeeded, the process may depend heavily on that person’s judgment. Where the relationship has already broken down, that is an obvious risk.

Practical safeguards may include:

• Appointing another manager to oversee the process.
• Having an independent person review the proposed objectives.
• Using documented examples and established standards.
• Ensuring feedback is specific and supported by evidence.
• Allowing the employee to respond to concerns and review records.
• Obtaining a second assessment where the work is specialised or subjective.
• Separating the person providing evidence from the person making the final decision, where practicable.

For a small business, an entirely separate management chain may not exist. An external adviser or suitably experienced independent assessor may help, although the employer remains responsible for the process.

The point is not to manufacture the appearance of independence. It is to make the assessment more reliable.

A Recent Example: Fahmy v Minimarc Childcare Centre

In Fahmy v Minimarc Childcare Centre Inc [2026] NZERA 585, the Employment Relations Authority found that an early childhood teacher had been unjustifiably dismissed following a performance-management process.

According to a published summary of the determination, the centre manager remained the principal assessor despite a serious relationship dispute and complaints involving that manager. The Authority considered that the manager’s central role undermined the objectivity of the assessment. The employer was ordered to reinstate the employee, pay lost wages and pay $25,000 in compensation. Fahmy v Minimarc Childcare

The reported decision does not establish that every complaint against a manager makes that manager incapable of assessing performance. It illustrates why a known conflict should be considered and managed, particularly where the assessment depends on subjective judgment.

A lengthy process with numerous meetings does not necessarily cure a problem with the person making the assessment. If anything, it may provide more opportunities for the same problem to repeat itself.

Give The Employee A Meaningful Say

A PIP should not arrive as a finished document accompanied by the instruction: “Sign here.”

Before finalising the plan, employers should give the employee the relevant concerns and supporting information, explain the proposed process and invite a response.

The employee may dispute the examples, identify missing context or explain why a proposed target cannot be met. They may suggest support the employer had not considered.

Those responses need to be considered with an open mind. A meeting is of limited value if the employer has already decided that nothing the employee says could change the plan.

Employees should also have a reasonable opportunity to obtain advice or representation and to bring a support person or representative to formal meetings. The employer should explain the potential consequences of the process, including whether continued underperformance could lead to a warning or dismissal.

Where dismissal or another decision likely to adversely affect continued employment is being considered, the good-faith obligations in the Employment Relations Act include providing access to relevant information and an opportunity to comment before the decision is made, subject to the Act’s provisions concerning confidentiality and other limitations. New Zealand Legislation

An employee’s signature should generally be treated carefully. It may confirm that they received the plan, rather than that they accept every allegation or agree that the standards are fair. If the purpose of signing is unclear, say what the signature means.

Do Not Move The Goalposts

Once a plan is underway, the employee should know what success looks like.

That does not mean an employer can never raise a new concern. It does mean that introducing new allegations, changing standards without explanation or reviving unrelated historical complaints can undermine the fairness of the process.

Imagine an employee is told to improve accuracy and turnaround times over eight weeks. At the final meeting, the employer acknowledges that those targets have been met but says the employee has failed the plan because their “attitude” remains unsatisfactory.

What attitude? On which occasions? Against what previously communicated standard?

If the employee had no fair opportunity to understand and address that concern, it is difficult to see how the original plan gave them a meaningful chance to succeed.

Employment New Zealand cautions that a performance-improvement process should be forward-looking and that raising different, older issues later may be viewed as unfair or inconsistent with good faith. Employment New Zealand

Where a genuinely new issue arises, the employer should identify it, give the employee an opportunity to respond and consider what separate or revised process is appropriate.

Review Progress Honestly, Including Improvement

A proper review records what has improved as well as what has not.

If an employee has met three of four objectives, the record should say so. If the remaining objective was affected by a software failure or delayed training, that should be recorded too.

Managers should avoid saving all criticism for the final meeting. Regular, specific feedback gives the employee a chance to understand where they stand while there is still time to improve.

At each review, ask:

• Which objectives have been met?
• What evidence supports that assessment?
• What progress has been made?
• What remains below the required standard?
• Has the promised support been provided?
• Are the targets and timeframes still reasonable?
• Has the employee raised an explanation that needs investigation?
• What needs to happen before the next review?

If the employee has reached the required standard, the plan should end. Confirm that in writing, acknowledge the improvement and explain the ordinary expectations that will apply going forward.

A plan that can only end in failure was never much of an improvement plan.

What If Performance Does Not Improve?

Sometimes an employee will not reach the required standard, even after clear expectations, appropriate support and a reasonable opportunity to improve.

An employer may then need to consider further action. That might involve additional support, an extension, a warning or, in some circumstances, dismissal.

The appropriate step depends on the facts. It is not enough to say that the employee “failed the PIP” and therefore must be dismissed.

Before making a decision, the employer should consider:

• Whether the concerns were established by reliable evidence.
• Whether the standards were reasonable and clearly communicated.
• Whether the employee received the promised support.
• Whether there was sufficient time to improve.
• What progress the employee made.
• The employee’s explanations.
• Whether the employer contributed to the problem.
• Whether a less severe response is appropriate.
• What the employment agreement and applicable policies require.

Employment New Zealand notes that there is no universal legal requirement for a fixed series of warnings before dismissal. For performance matters, however, it generally recommends a written warning and a final written warning before termination, while emphasising that the appropriate approach depends on the circumstances and any applicable agreement or policy. Employment New Zealand

A dismissal decision requires its own fair consideration. The employee should understand that dismissal is being considered, have access to relevant information and have a reasonable opportunity to respond before a decision is made.

A PIP Can Be Fair

The existence of a PIP does not itself establish that an employer has acted unfairly.

In Lowings v Vice-Chancellor of the University of Canterbury [2025] NZERA 189, the Employment Relations Authority found that the employer was justified in placing the employee on a PIP and dismissing him for poor performance. The Authority considered the process against principles that included clear standards, warnings about possible consequences, assistance and a reasonable opportunity to improve. determinations.era.govt.nz

Employment New Zealand’s summary notes that the plan identified the performance issues, standards, target dates and support, and that the employee and his representative had an opportunity to provide input. Employment New Zealand

The practical lesson is that employers can address genuine performance concerns. The quality of the process and the evidence matters.

The Legal Test: Could A Fair And Reasonable Employer Have Done This?

Under section 103A of the Employment Relations Act 2000, the Authority or Employment Court assesses whether the employer’s actions, and the way the employer acted, were what a fair and reasonable employer could have done in the circumstances at the time.

The legislation requires consideration of whether the employer sufficiently investigated the concerns, raised them with the employee, gave the employee a reasonable opportunity to respond and genuinely considered their explanation. New Zealand Legislation

The test can apply to an employer’s action as well as a dismissal. An employee may therefore challenge an unjustified disadvantage arising during employment, depending on the facts, even if they have not been dismissed.

The Authority and Court also consider the circumstances as a whole. A minor procedural defect that did not result in unfair treatment does not, by itself, make an action or dismissal unjustified. Equally, a thick folder of documents does not automatically make a fundamentally unfair process reasonable.

For employers, the question should not be whether enough paperwork has been generated to defend the decision. It should be whether the employee was treated fairly while the decision was being made.

A Practical PIP Checklist For Employers

Before putting a plan in place, work through the following.

The Question Every Employer Should Ask

Before presenting a PIP, an employer should ask:

If the employee meets the standards in this plan, are we genuinely willing to keep them?

If the honest answer is yes, the plan can be designed to give that outcome a real chance.

If the answer is no, the employer should pause. A process presented as an opportunity to improve becomes very difficult to defend if the decision to remove the employee has effectively already been made.

Performance management should help an organisation retain capable people, identify where support is needed and address genuine problems before they become entrenched.

Done properly, it is a management tool. Done badly, it can turn a workplace problem into an employment dispute, complete with legal costs, lost productivity and a manager explaining to the Authority what they meant by “an acceptable standard”.

Sources

• Employment Relations Act 2000, section 4: Good faith
• Employment Relations Act 2000, section 103A: Test of justification
• Employment New Zealand: Managing performance issues
• Employment New Zealand: Formal ways to manage a performance issue
• Employment New Zealand: Informal ways to manage a performance issue
• Lowings v Vice-Chancellor of the University of Canterbury [2025] NZERA 189