How to Run a Performance Improvement Plan in NZ Without Creating a Personal Grievance

A Performance Improvement Plan (PIP) is one of the most useful tools available to a NZ employer, and one of the most frequently misused. When done correctly, a PIP gives an underperforming employee a genuine opportunity to improve, protects the employer's position if dismissal ultimately becomes necessary, and creates a documented record of a fair process. When done incorrectly, it becomes the foundation of a personal grievance.

This guide walks through the key steps of a lawful, effective PIP in New Zealand, and the most common mistakes to avoid.

Before You Start: Is a PIP the Right Tool?

A PIP is appropriate when an employee is not meeting the performance standards required by their role, and when there is a genuine belief that improvement is possible with the right support. It is not appropriate as a mechanism to manage someone out of the business when the real issue is conduct, redundancy, or a personality conflict.

Using a PIP for the wrong purpose is one of the most common ways employers create grievance liability. If the underlying issue is conduct (dishonesty, bullying, policy breach), a disciplinary process is the correct pathway. If the role is no longer required, a redundancy process is appropriate. Using a PIP as a substitute for either of these processes is procedurally unfair and will not withstand ERA scrutiny.

Step 1: Document the Performance Issue Clearly

Before initiating a PIP, you need to be able to articulate clearly and specifically what the performance problem is. Vague concerns, 'not meeting expectations', 'attitude issues', 'not a good fit', are not sufficient. The ERA will expect you to identify specific, measurable performance standards that are not being met, with specific examples.

Document the following before you begin:

• The specific performance standards required by the role (ideally from the job description or employment agreement)

• The specific instances where those standards have not been met (dates, examples, outcomes)

• Any previous informal feedback or coaching that has been provided

• The impact of the underperformance on the business, team, or clients

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Step 2: Have a Preliminary Conversation

Before issuing a formal PIP, have a direct conversation with the employee about the performance concerns. This serves two purposes: it gives the employee an opportunity to respond before formal action is taken, and it ensures the employer has genuinely considered whether there are any underlying reasons for the underperformance (health issues, personal circumstances, lack of training or resources).

This conversation should be documented. Note the date, who was present, what was discussed, and what the employee said in response.

Important: If the employee discloses a health condition or personal circumstance that may be contributing to their performance, you have obligations under the Health and Safety at Work Act and the Human Rights Act that need to be considered before proceeding. Seek HR advice before continuing.

Step 3: Draft the PIP Document

A well-drafted PIP document should include:

1. A clear statement of the performance standards required

2. A specific description of how current performance falls short of those standards

3. Clear, measurable improvement targets with specific timeframes

4. The support and resources the employer will provide to help the employee improve

5. The review process, how often performance will be assessed and by whom

6. The consequences of not meeting the improvement targets

7. The employee's opportunity to comment on or respond to the PIP

The PIP should be written in plain language, be specific and measurable, and be realistic.

Setting targets that are impossible to achieve will undermine the process and create grievance risk.

Step 4: Meet with the Employee

The employee must be provided the opportunity to have a support person present at any meeting where the PIP is discussed. This is a legal requirement under the Employment Relations Act. Failing to offer this right is a procedural failure that can invalidate the entire process.

At the meeting, walk through the PIP document, explain the concerns, give the employee a genuine opportunity to respond, and listen to what they say. If they raise new information that is relevant, a health issue, a training gap, a resource problem, you may need to pause the process and investigate before proceeding.

Step 5: Implement and Monitor

Once the PIP is agreed (or issued, if the employee does not agree), implement it consistently. Hold the scheduled review meetings, document the outcomes, provide the support you committed to, and give the employee genuine feedback throughout the process.

If performance improves, acknowledge it. If it does not, document the specific instances of continued underperformance at each review point. This documentation is what will protect you if the process ultimately results in dismissal.

Step 6: At the End of the PIP Period

At the conclusion of the PIP period, you have three possible outcomes:

1. Performance has improved to the required standard, acknowledge this, close the PIP, and continue monitoring

2. Performance has partially improved, consider extending the PIP with revised targets, or proceed to a disciplinary process

3. Performance has not improved, proceed to a disciplinary process that may result in dismissal

   
   

If you are proceeding to a disciplinary process, the PIP documentation becomes critical evidence of a fair process. The ERA will look at whether the employee was given a genuine opportunity to improve, whether the targets were reasonable, and whether the employer provided adequate support. If you have followed the steps above, you will be in a strong position.

The Most Common PIP Mistakes NZ Employers Make

• Setting vague or unmeasurable targets ('improve your attitude', 'be more proactive')

• Failing to offer a support person at meetings

• Not documenting review meetings and outcomes

• Using a PIP as a pretext for a decision that has already been made

• Failing to provide the support resources committed to in the PIP

• Rushing the process to reach a predetermined outcome

• Not seeking HR advice before initiating the process

  
  

When to Get Help

Performance management is one of the highest-risk areas of employment relations for NZ employers. The ERA takes procedural fairness seriously, and a technically justified decision made through an unfair process is still a personal grievance waiting to happen.

If you are considering initiating a PIP, or if you are partway through one and unsure whether you are on the right track, call The HR Factor to get guidance before you make a decision, not after it has gone wrong. Book a free Clarity Call to find out more.