A Performance Improvement Plan is one of the most consequential documents an employer can issue. Done well, it gives a struggling employee a genuine chance to improve and gives the employer clear evidence of a fair process if matters escalate. Done badly, it exposes the business to unfair dismissal claims, discrimination findings, and significant tribunal awards. This checklist sets out what the law and ACAS guidance require — and where employers most often go wrong.

Before issuing a PIP, Caira from Unwildered can help review the draft document, identify gaps, and check it against the employee's job description and contract. Caira is backed by more than 10,000 legal documents for England and Wales.

What Is a Performance Improvement Plan?

A Performance Improvement Plan is a formal document setting out an employer's specific concerns about an employee's capability — their skill, aptitude, or performance against the required standard of their role. It also sets measurable targets, a timeline for review, and the support the employer will provide.

Under section 98(2)(a) of the Employment Rights Act 1996, capability is a potentially fair reason for dismissal. A well-designed PIP is the evidence that grounds that reason in a fair and documented process.

The ACAS Code of Practice on Disciplinary and Grievance Procedures is not legally binding in itself, but Employment Tribunals are required to take it into account. Where an employer fails to follow the Code, the tribunal may increase any compensation award by up to 25 per cent.

When Should You Use a Performance Improvement Plan?

ACAS guidance is clear: a formal PIP should follow, not precede, a genuine attempt to resolve performance concerns informally. That means the employer should first have tried coaching, additional training, clearer communication of expectations, or regular supportive feedback before escalating to a formal process.

Common triggers that may properly lead to a PIP:

• Quality of work consistently falling below a clearly defined and communicated standard.

• Deadlines repeatedly missed without adequate explanation or recovery.

• Specific skill gaps that have been identified and discussed informally but not addressed.

• Repeated errors that have caused or risk causing harm to clients, colleagues, or the business.

Before initiating a PIP, consider whether the performance concern is a capability issue (can't do) or a conduct issue (won't do). Capability concerns belong in a capability procedure. Conduct concerns belong in a disciplinary procedure. Using the wrong procedure is itself a fairness risk.

Performance Improvement Plan vs Disciplinary Procedure: What Is the Difference?

Conflating the two is a common error. Placing an employee in a disciplinary procedure for what is actually a capability issue (or vice versa) can undermine the fairness of the process and weaken the employer's position at tribunal.

What Must a Fair Performance Improvement Plan Include?

ACAS guidance and Employment Tribunal decisions consistently require a fair PIP to include the following elements:

• Specific concerns: The document must identify the exact performance shortfalls, with examples and dates where possible. Vague statements such as "needs to improve overall performance" are not sufficient.

• SMART targets: Each target must be specific, measurable, achievable, realistic, and time-bound. More on this below.

• Support and resources: The employer must identify what it will do to help the employee — training, mentoring, additional supervision, adjusted workload, or equipment.

• Review timeline: A clear start date, review meetings scheduled during the period, and an end date for the plan.

• Consequences: The document should state explicitly that failure to meet the targets may lead to further formal action including dismissal. The employee must not be surprised by this.

• Right to be accompanied: At formal capability meetings during the PIP period, the employee has a statutory right under section 10 of the Employment Relations Act 1999 to be accompanied by a trade union representative or a fellow worker.

• Right to appeal: Any formal decision made at the conclusion of the plan must be communicated in writing with notification of the right of appeal.

SMART Targets in a Performance Improvement Plan: What That Means in Practice

SMART is not just a management framework. In Employment Tribunal terms, it is closely linked to whether a dismissal based on capability was fair. Targets that are vague, subjective, or impossible to measure give the employee grounds to argue the process was unfair.

How Long Should a Performance Improvement Plan Last?

There is no statutory duration. ACAS guidance requires the timeframe to be reasonable. Relevant factors include:

• The complexity of the role and the nature of the performance concern.

• The time genuinely needed to demonstrate improvement.

• Whether training or new resources need to be put in place first.

As a general guide:

An Employment Tribunal will ask whether the employee was given a genuine opportunity to improve, not just a formal period to run down before dismissal. A PIP that runs for two weeks before a capability hearing for a senior manager is unlikely to survive scrutiny.

Can a Performance Improvement Plan Include Tasks Not in the Job Description?

This is one of the most significant employer errors in practice. A PIP should assess performance against the employee's actual contractual role, as defined by their job description and terms of employment.

Most contracts include a flexibility clause — typically phrased as "and any other reasonable duties as required." Courts have interpreted these clauses narrowly. The clause allows an employer to assign tasks of a similar kind and level to the core role, not tasks that fundamentally change what the employee was engaged to do.

Including PIP targets that cover duties outside the employee's job description creates several risks:

• The employee has grounds to challenge the target as beyond scope, which undermines the fairness of the process.

• If the employee is dismissed for failing to meet out-of-scope targets, an Employment Tribunal may find the dismissal procedurally and substantively unfair.

• If the employer was seeking to impose an entirely different role without agreement, the employee may have grounds for a constructive dismissal claim.

Before finalising a PIP, check each target against the employee's current job description and contract. If the role has genuinely evolved, update the job description through a proper consultation process before using the new scope as the basis for a PIP.

Performance Improvement Plan and Disability: What the Equality Act Requires

Under sections 20 and 21 of the Equality Act 2010, employers have a positive duty to make reasonable adjustments for disabled employees. Under section 6 of the Equality Act 2010, a person is disabled if they have a physical or mental impairment that has a substantial and long-term adverse effect on their ability to carry out normal day-to-day activities. Long-term means lasting or expected to last at least 12 months.

The duty to make reasonable adjustments applies to the PIP process. This means that before issuing or finalising a PIP for an employee with a disability:

• Review whether the employee's disability may be connected to the performance concern.

• Obtain an occupational health assessment if you have not already done so.

• Consider what specific adjustments to the PIP targets, timeline, or support would be reasonable.

• Document the adjustments considered, whether implemented, and why.

Failure to make reasonable adjustments can give rise to a discrimination claim that is separate from, and potentially more costly than, an unfair dismissal claim. Disability discrimination compensation is uncapped. Unfair dismissal compensation has a statutory cap currently set at £115,115 or one year's gross pay, whichever is lower.

The duty is triggered by knowledge. If you know or ought reasonably to have known about an employee's disability — from a fit note, an occupational health referral, or the employee's own disclosure — you cannot later argue ignorance. If in doubt, seek an occupational health opinion before proceeding.

What Happens If the Employee Fails the Performance Improvement Plan?

When the PIP period ends, hold a formal review meeting. The employee has the right to be accompanied at that meeting. Consider the evidence objectively.

Possible outcomes:

• The employee has met all targets. The plan ends. Confirm this in writing.

• Progress is partial. Consider extending the plan for a defined further period with clear remaining targets.

• The employee has not met the targets. Consider whether any external factor — health, personal circumstances, lack of support from the employer — contributed. If not, you may proceed to a capability hearing.

• At the capability hearing, the employee has the right under section 10 of the Employment Relations Act 1999 to be accompanied by a trade union representative or a fellow worker, and the right to respond to the concerns. Dismissal must be the outcome of a fair hearing, not a foregone conclusion.

• The employee must be told of the right of appeal in writing. Offer a meaningful appeal to a manager or panel not previously involved.

Before deciding on dismissal, consider whether there is a suitable alternative role available within the organisation. Tribunals will ask whether this was considered.

Does a Performance Improvement Plan Lead to Termination?

A PIP can, but does not inevitably, lead to dismissal. Employers who use a PIP as a paper-trail exercise rather than a genuine support mechanism run significant legal risk.

Employment Tribunals are experienced at identifying "sham" PIPs — those where the outcome was determined before the process began. Evidence of a predetermined decision includes:

• A PIP issued immediately after a protected activity (grievance, protected disclosure, maternity leave).

• Targets that no reasonable employee in the role could achieve in the timeframe.

• Support promised in the plan but never delivered.

• Review meetings where the employee's evidence of progress was not considered.

• A capability hearing where the decision to dismiss had clearly been made in advance.

If a tribunal finds the dismissal was substantively or procedurally unfair, it may award compensation including a basic award and a compensatory award. Where the employer failed to follow the ACAS Code, the compensatory award may be increased by up to 25 per cent.

Can a Performance Improvement Plan Lead to an Unfair Dismissal Claim?

Yes. A PIP that does not comply with the ACAS Code and the principles of substantive fairness may ground an unfair dismissal claim.

Current qualifying period for unfair dismissal is two years of continuous employment. Under the Employment Rights Act 2025, this reduces to six months from 1 January 2027. Employers should factor this into how they manage performance for employees approaching or past that threshold.

For dismissal to be fair at tribunal, the employer must show:

• A potentially fair reason (capability under s.98(2)(a) ERA 1996).

• That they genuinely believed the employee's performance was below standard.

• That the belief was held on reasonable grounds after a reasonable investigation.

• That the procedure was fair — including adequate support, SMART targets, reasonable timeframe, right to be accompanied, and right of appeal.

• That dismissal was within the band of reasonable responses available to the employer.

Common Mistakes Employers Make With Performance Improvement Plans

Sources

• Employment Rights Act 1996, section 98 — capability as a potentially fair reason for dismissal.

• Employment Relations Act 1999, section 10 — right to be accompanied.

• Equality Act 2010, sections 20 and 21 — duty to make reasonable adjustments.

• Equality Act 2010, section 6 — definition of disability.

• ACAS Code of Practice on Disciplinary and Grievance Procedures.

• ACAS, managing performance guidance.

• GOV.UK, dismissing staff — capability procedure.

Disclaimer: This article is general information not legal, financial, medical or tax advice.