Performance Improvement Plan (PIP): Is It a Warning Before Termination?

Written by: Izz Murtada

Many employees feel scared when their manager says, “We would like to put you on a PIP.” Many employers also ask if a PIP is the right step when work is not good enough. In this article, we explain what a PIP is, how it works and what the Employment Act 1955 (Act 265) says about ending a job.

1. What Is a Performance Improvement Plan (PIP)?

A Performance Improvement Plan, or PIP, is a written plan that helps an employee improve their work. It sets out what is not going well, what the employee needs to do better and how long they have to do it.

Employers use a PIP when an employee’s work is below the level the company expects, and the employer believes the employee can still improve with some guidance. The aim is to help the employee get back on track.

It is good to know that the words “Performance Improvement Plan” do not appear in the Employment Act 1955. A PIP is a workplace practice, not a step the Act requires. But the Act still matters, because it sets the rules on how a job can be ended.

2. Why Would an Employee Be Placed on a PIP?

An employee may be placed on a PIP for reasons like these:

• Work targets are often not met
• Work has many mistakes or needs to be redone
• Work is always late
• The employee has not learned new skills or tasks needed for the job
• Customers or co-workers often complain about the work

Sometimes the cause is not the employee alone. The job may not be clear, training may be missing or the workload may be too heavy. A fair employer looks at these things first.

A PIP is also different from a misconduct case. Misconduct means bad behaviour, such as stealing or lying. Section 14 of the Act says that for misconduct, an employer must hold a “due inquiry” first. Only after that can the employer dismiss without notice, downgrade the employee or give a lighter punishment. A PIP is about work quality, not bad behaviour.

 

3. What Should a PIP Include?

A good PIP is clear, fair and written down. It should have these parts:

• Areas to improve: What exactly is the problem? Give real examples, not general comments like “your attitude is bad”.
• Targets: What does good work look like? Use numbers or clear steps where possible.
• Timeline: How long does the employee have? Many companies use 30, 60 or 90 days. This depends on the job.
• Support: What will the company do to help? This can be training, coaching or regular meetings with the manager.
• Review dates: When will the manager and employee meet to check progress?
• What happens next: Both sides should know the possible results at the end.

The employee should get a copy of the plan and have a chance to ask questions. A PIP that is clear and fair is good for both sides.

4. Does a PIP Mean the Employee Will Be Terminated?

No, not always. A PIP is not the same as a termination letter. Its main purpose is to give the employee a fair chance to improve. Many employees finish their PIP and go back to normal work.

But a PIP can also be a first step before termination if there is no improvement. So we can say it is a serious warning, but it is not a final decision.

If an employer does decide to end the job, the Act has rules. Section 12 says either side may end a contract of service by giving notice. The notice must be in writing. The length of notice should follow the contract. If the contract says nothing, the notice cannot be less than:

• 4 weeks, if the employee has worked for less than 2 years
• 6 weeks, if the employee has worked for 2 years or more but less than 5 years
• 8 weeks, if the employee has worked for 5 years or more

Under section 13, an employer may also end the job without waiting for the notice period by paying wages in place of notice.

5. What Happens After the PIP Period Ends?

When the PIP period ends, the manager and employee meet to look at the results. There are usually three outcomes:

• The employee improves. The PIP ends and the employee carries on with the job. The company may still check in from time to time.
• The employee is improving, but needs more time. The employer may extend the PIP and set new dates.
• The employee does not improve. The employer may decide to end the job. The employer should follow the contract and the Act, including the notice rules above.

For employers, keep good records. Write down the meetings, the targets and the results. Be fair and speak to the employee honestly.

For employees, take the PIP seriously. Ask questions, ask for help and keep your own notes. If you think a decision was unfair, you can talk to your HR department first. Under section 69 of the Act, an employee who is unhappy with an employer’s decision under section 14 can make a complaint to the Director General of Labour. The complaint must be made within 60 days from the day the decision is told to the employee. Please note that other laws may also apply to your case, so it is wise to get proper advice.

Need Help With Performance Matters at Work?

Handling a PIP is not easy. Employers want to be fair and protect the business. Employees want to know where they stand. This is where a good HR partner can help. At Kita Strategies, we are an HR company that supports businesses in Malaysia with HR matters, from writing clear policies and employment contracts to guiding managers on fair and proper steps. If your company needs help with performance management or any other HR question, we are happy to talk to you.