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When an employee under-performs for a continuous period of time, an employer is entitled to place the employee on Performance Improvement Plan or (“PIP”). The employer would usually place the under-performing employee on a PIP in the hopes that the employee will take note of his shortcomings and “buck up” and improve himself.

However, placement of employees on PIPs are often taken negatively, and the employee would react in a defensive manner against the PIP imposed on them.  Therefore, PIPs are often very sensitive and can act as a double-edged sword. While useful to motivate an employee to improve their work performance, if implemented wrongly, it could damage employee morale and in worse cases, affect the employer’s case if there is an unfair dismissal claim.

Employers and employees should not enter into a PIP with the expectation that this is an “exit plan”. The overriding goal of a PIP should always be the improvement of the employee’s performance to the expected standards, not dismissal.

As a matter of good industrial practice, this is a check list of things that you should consider when formulating a PIP for an under-performing employee. These are not necessarily mandatory legal requirements, but are recommended practices.

1. Specific Under-performance Must Exist

Only under-performing employees should be placed on PIP. In this connection, the employee’s under-performance must be evident and specific that is easily identifiable by the Company. If the employer  themselves cannot properly articulate what is the under-performance, it is worth considering whether this is really a suitable case for PIP.

2. Information on Poor Performance Must be Detailed in the PIP

It is important for the employer to detail out the employee’s shortcomings in the PIP. These details of shortcomings must be highlighted expressly so that the employee is aware of his gaps and shortcomings that the Company has identified and requires the employee to improve.  The information on the employee’s under-performance must be specified and listed with detailed clarity; where possible, specific examples of poor performance must be cited.

As a guide to highlight the details of the employee’s performance, the employer may refer back to the employee’s job scope or previously set KPIs and identify what is expected from the employee before listing out the details on the under-performance. We usually recommend that the PIP be listed out in the form of a detailed table.

Don’t use general statements like “You are slow in delivering your work”, but rather use specific examples like “You were supposed to deliver [Project] by [date]. However, you only delivered it on [date] after repeated reminders from your supervisor on [date], [date] and [date].”

3. Length of PIP Must be Expressly Provided

The length of the PIP must be clearly set out so that the employee is aware that during this period, the Company would place its utmost attention in the employee’s performance so that his work performance is improved and he achieves what is required of him. This would mean that an express date of commencement and conclusion date of the PIP must be specified by the Company.

4. The PIP Must Have Express Targets for the Employee to Achieve & Consequences for Non-Achievement

After identifying the areas and gaps that the employee must improve on, it is recommended that the employer set clear and objective targets for the employee to achieve.

For example, if the employee is hired for a sales role and his sales has been deteriorating rapidly, once the employer has made clear the decreasing amount of sales that requires improvement, the employer must also state in the PIP the target that the employee is required to achieve within the specified time frame (e.g. “Achieve RM[x] in revenue by [date]”) This is done so that the employee is aware what is expected of him and that he is able to put in the effort to achieve these requirements.

The PIP should inform the employee what are the possible consequences if the employee fails to complete the PIP satisfactorily (i.e. the employee could face dismissal for poor performance).

5. The PIP Must be Communicated Correctly

As a PIP may be a sensitive issue to some employees as it may affect their livelihood and career development in the Company, it is important for the PIP to be communicated correctly and directly to the employee. It would be best if the employer’s management or HR department has a personal meeting to convey the news to the affected employee.  During the communication of the PIP, it is important for the employer to state the reason the employee is placed on PIP and what is expected of the employee during this PIP period. This process is also important so that the employee has an avenue to state his views and opinion on the placement.

6. Consistent Reviews and Feedback

A PIP is not a document that you can just issue and then ignore until it’s time for the employee’s performance review. Upon issuing a PIP, the employer must always ensure that there is a consistent series of reviews and feedback to keep tabs on the status of the employer’s performance improvement during the PIP period.   For example, an employer can commit to having a monthly or fortnightly review with the employee to see how they are tracking on the PIP.

These reviews are recommended in order to make sure that the employees are growing and improving to the requirements that the employer expects them to achieve in the PIP. It also provides a system of check and balance so that the employee is able to align correctly with the intentions and target of the PIP to improve his work performance. When an employee starts drifting away from the course to achieve his requirements, these reviews would be useful to ensure that they achieve the expectations of the PIP. This would also create an opportunity for the employee to voice his opinions for the PIP.

7. Final Review

Notwithstanding the above, at the end of the PIP period, the employer must provide a final review to assess the employee’s performance during the PIP period. It is through this final review that the Company must provide comments to improve and more importantly, whether the employee has achieved the targets set for him during the period.

It would be best if the final review can be done through a face to face meeting so that the employee would be given an opportunity to explain his experience throughout the PIP period. At the end of the final review, the Company would need to inform the employee on the period of time the Company requires to deliberate before coming to a conclusion of the PIP.

8. Make an Informed Decision

Only after the final review is conducted, the Company and / or its HR department should deliberate with all stakeholders of the PIP before forming a decision of the employee’s PIP. Once the outcome is finalized, it is important for the Company to convey the PIP outcome appropriately to the employee through a meeting and confirmed through a written letter. The employee should also be given an opportunity to express his views on the outcome of the PIP.

The above serves as a guide and important issues that employers may want to pay special attention to when placing an employee on PIP. The above checklist may differ depending on the nature of work and job scope of the employee. Nevertheless, employees are under the duty to comply with their employer’s instruction to participate in the PIP. An employee may of course disagree with their performance appraisal, but should raise their grievances through the proper channels instead of resisting a PIP or refusing to cooperate.

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About the author: Zi-Han Lim is an associate in the dispute resolution practice group at Donovan & Ho. He is experienced in dispute resolution, focusing on employment and industrial relations, administrative law and commercial litigation. 

Donovan & Ho is a law firm in Kuala Lumpur, Malaysia. Our practice areas include employment law, dispute resolution (litigation and arbitration), corporate and tax advisory, and real estate/conveyancing. Have a query? Contact us.

 

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