How To Run Performance Improvement Plans (PIPs) Lawfully In New Zealand

When you’ve got a team to run, performance issues can quickly turn into a bigger problem than the work itself. Deadlines slip, customer complaints increase, other staff get frustrated, and suddenly you’re spending more time managing the issue than growing your business.

A well-run Performance Improvement Plan (PIP) can help you turn things around in a structured, fair way. But in New Zealand, a PIP also needs to be handled carefully - because if it’s rushed, vague, or used as a “paper trail” to exit someone, it can create legal risk (even if you’ve got genuine concerns).

This guide explains how to run a performance improvement plan (PIP) in New Zealand that employers can rely on - one that supports your employee to improve, while also meeting your obligations as an employer.

Note: This article is general information only and isn’t legal advice. Every workplace situation is different, so consider getting tailored advice before taking action.

What Is A Performance Improvement Plan (PIP) In New Zealand?

A performance improvement plan (often called a “PIP”) is a formal performance management tool used when an employee isn’t meeting the expected standards of their role.

In practical terms, a PIP sets out:

• What the performance concerns are (clearly and with examples)
• What “good performance” looks like for the role
• What the employee needs to do to reach that standard
• What support you’ll provide (training, mentoring, adjusted workload, etc.)
• How you’ll measure improvement and when you’ll review it
• What may happen if improvement doesn’t occur (which could include warnings and, in some cases, dismissal)

A strong PIP isn’t just a document - it’s a process. In New Zealand, employment issues are often decided based on procedure and fairness, not just what an employer believed or intended.

It’s also worth saying: a PIP should not be treated as a “standard script” you can run for every situation. The right approach depends on the employee’s role, seniority, length of service, what’s been communicated before, and what support is realistic in your business.

When Should You Use A PIP (And When Shouldn’t You)?

In a small business, it’s tempting to jump straight to formal performance management when you’re under pressure. But the best outcomes usually come from getting the timing right.

Common Situations Where A PIP Makes Sense

• The employee has been told about the issue informally, but performance hasn’t improved.
• There is a pattern of underperformance (not just one bad day or a single error).
• The expectations of the role are reasonable and have been communicated.
• You can identify specific outcomes the employee needs to meet.
• There are realistic supports available to help the employee improve.

Situations Where A PIP Might Not Be The Right Tool

A performance improvement plan (PIP) in New Zealand is usually not the right approach if the issue is really about:

• Misconduct (eg theft, violence, serious policy breaches) - that’s typically a disciplinary process, not a PIP.
• Health, injury, or disability issues - you may need to look at medical information, reasonable accommodations, and a different type of process.
• Training gaps caused by the business (eg no onboarding, unclear instructions, no supervision) - you may need to fix your systems first.
• Restructures / redundancy - performance processes shouldn’t be used to avoid a proper redundancy process.

If you’re unsure whether you’re dealing with performance, misconduct, or something else, it’s usually worth getting advice early - especially before you put anything in writing.

What Are Your Legal Obligations When Running A PIP In NZ?

There isn’t a single “PIP law” in New Zealand. Instead, PIPs sit within the broader rules of fair process under the Employment Relations Act 2000, including the duty of good faith.

In simple terms, you need to act like a fair and reasonable employer would in the circumstances.

1) Good Faith (And Being Genuine About Improvement)

Good faith means you must be active and constructive in maintaining the employment relationship. If you are running a performance improvement plan (PIP) in New Zealand, you should treat it as a real opportunity to improve - not a box-ticking exercise or a pre-determined exit plan.

That includes being honest about concerns, sharing relevant information, giving the employee a meaningful chance to respond, and providing reasonable support.

2) Procedural Fairness (A Fair Process Matters)

Even if you’re convinced the employee is underperforming, you still need a fair process. In many employment disputes, the question becomes: did you handle the process properly?

Procedural fairness usually includes:

• Clearly explaining what the concerns are
• Giving the employee a genuine opportunity to respond
• Considering their explanation with an open mind
• Offering support and reasonable time to improve
• Reviewing progress fairly, based on evidence

3) Clarity Of Expectations (And Evidence)

It’s hard to manage performance if role expectations are unclear. A lawful PIP process usually relies on having:

• a clear job description and responsibilities
• reasonable performance standards
• records showing the issue (examples, dates, impact, customer feedback, KPIs where applicable)

This is one reason it’s so important to start with a solid Employment Contract and documented expectations from day one.

4) Following Your Own Documents And Policies

If you have a staff handbook or internal procedures, you should follow them - or you may need to explain why a different approach is reasonable in the circumstances.

Many businesses build their performance expectations into a Workplace Policy framework, so your managers aren’t improvising when something goes wrong.

5) Privacy And Sensitive Handling Of Information

Performance management involves personal information. Notes of meetings, complaints, and feedback need to be handled carefully and shared only with people who genuinely need access.

If you’re collecting performance information through monitoring tools (eg CCTV, device logs, call monitoring), it’s important to make sure your approach lines up with privacy obligations and your internal documentation, such as an Employee Privacy Handbook.

How To Run A Performance Improvement Plan (PIP) In New Zealand: A Step-By-Step Process

If you want a performance improvement plan (PIP) in New Zealand that small businesses can run confidently, you need a structured process that’s specific, documented, and fair.

Below is a practical, employer-focused process you can adapt to most roles.

Step 1: Prepare Properly Before You Raise It

Before you start a formal PIP, get your facts straight. That means:

• Identifying the performance issues and when they occurred
• Gathering examples (work outputs, missed deadlines, error rates, customer complaints, etc.)
• Checking what expectations have been communicated previously (including training provided)
• Considering whether there are other factors at play (workload, personal issues raised, unclear instructions)

Tip: performance conversations go off-track when the employer relies on broad statements like “your attitude isn’t right” or “you’re not a good fit”. Keep it anchored in behaviours and outcomes.

Step 2: Invite The Employee To A Meeting (And Keep It Fair)

You’ll usually start with a meeting to outline the concerns and discuss next steps.

In many situations, it’s best practice to:

• Give reasonable notice of the meeting
• Tell the employee the purpose of the meeting (performance concerns)
• Let them bring a support person (for example, a colleague, union representative, or other support person)
• Share key information you’ll be relying on (so they can respond)

The goal here is not to “win” the meeting. It’s to set a fair foundation for the process.

Step 3: Explain The Concerns Clearly (And Let Them Respond)

In the meeting, talk through:

• What the expected standard is (and where it’s documented)
• What you believe isn’t meeting that standard
• Concrete examples and business impact

Then pause and let the employee respond. They may:

• agree and ask for support
• disagree and provide context
• raise issues you weren’t aware of (eg training gaps or unclear instructions)

You need to genuinely consider what they say. If their response suggests the issue is caused by something the business can fix (eg no training, unclear priorities), you may need to adjust your approach before moving into a formal PIP.

Step 4: Put The PIP In Writing (Make It Specific And Measurable)

Your written PIP should be tailored to the role and the concern. In most cases, you’ll want it to include:

• Performance areas of concern (e.g. accuracy, communication, task completion, customer service)
• Required standard (what is expected)
• Improvement actions (what the employee needs to do differently)
• Support from you (training, buddying, tools, adjusted workflow)
• Timeframes (start date, review dates, end date)
• How progress will be assessed (KPIs, spot checks, client feedback, manager review)
• Consequences if performance doesn’t improve (without pre-judging the outcome)

Be careful with wording around consequences. You can explain that continued underperformance may lead to further action (including warnings and possibly dismissal), but avoid language that suggests the decision is already made.

Step 5: Provide The Support You Promised

This is where many PIPs fall over. If the PIP says you’ll provide training, coaching, or weekly check-ins - you actually need to do it.

If you don’t, the employee may later argue:

• they weren’t given a fair chance to improve, or
• the process was designed to make them fail.

Support doesn’t need to be expensive, but it does need to be genuine and reasonable in context.

Step 6: Hold Regular Review Meetings (And Document Them)

Most PIPs work best with scheduled checkpoints (for example, weekly or fortnightly). In review meetings:

• go through progress against each PIP requirement
• raise any new concerns promptly (don’t save it for the end)
• give the employee a chance to respond
• confirm any adjustments to support or expectations

After each meeting, follow up with a short written summary (even an email) confirming what was discussed. This avoids misunderstandings and keeps a clear record.

Step 7: Decide The Outcome Fairly At The End Of The PIP

At the end of the PIP period, you’ll usually decide whether:

• the employee has improved sufficiently and the PIP ends
• the PIP should be extended (with clear reasons and revised supports)
• formal warnings or further steps are needed
• termination is being considered (in more serious or ongoing cases)

If you are considering dismissal, you should be particularly careful. Termination for performance in NZ generally requires a fair process, clear communication, and a genuine chance to improve.

This is one of those moments where getting advice can save you a lot of stress. Many employers use a structured Performance Management Process to make sure all steps are handled correctly and consistently.

Common PIP Mistakes That Create Legal Risk For Employers

Even well-meaning employers can end up in trouble if the PIP process isn’t handled carefully. Here are some of the most common issues we see.

Using A PIP As A Shortcut To Termination

If your language or behaviour suggests the outcome is pre-determined, the PIP can look like a “sham process”. If you genuinely believe the employment relationship can’t continue, get advice on the right process (which may be different from a PIP).

Setting Vague Or Unmeasurable Expectations

“Improve your attitude” or “be more proactive” is hard to measure and can feel subjective.

Instead, link expectations to observable behaviours, such as:

• responding to customer emails within X hours
• completing job sheets with required details
• meeting weekly output targets
• following escalation steps when an issue arises

Not Giving Enough Time Or Support

A two-week PIP might be reasonable for a simple role with clear targets - but not for complex roles, new staff, or situations involving training needs. What’s “reasonable” depends on the circumstances, so don’t treat timeframes as one-size-fits-all.

Comparing Employees Instead Of Managing The Role Standard

PIPs should be based on the standard required for the role, not “what others are doing”. Comparisons can lead to inconsistency, especially if other team members have different duties, experience, or workloads.

Poor Documentation (Or Over-Documentation)

You should document key steps and meetings, but keep it factual and professional.

Avoid loaded language like “lazy”, “hopeless”, or “bad attitude”. Stick to what happened, when it happened, and what the expectation is.

Ignoring Wider Employment Risks

Sometimes a “performance issue” overlaps with other risks - such as stress, burnout, bullying complaints, or discrimination concerns. If anything like that is raised during the process, pause and get advice. Trying to push through can make things worse.

If you need tailored support, speaking with an Employment Lawyer early can help you choose the right process and reduce the risk of escalation.

Key Takeaways

• A performance improvement plan (PIP) in New Zealand is a structured process designed to help an employee meet the required standard of their role, with clear expectations, timeframes, and support.
• To run a lawful performance improvement plan (PIP) in New Zealand, employers should focus on good faith, procedural fairness, and giving a genuine opportunity to improve.
• A strong PIP is specific and measurable - vague expectations and subjective language can create disputes and make outcomes harder to justify.
• Always follow a fair meeting process, allow the employee to respond, and keep records of what was discussed and what support was provided.
• PIPs are for performance issues - misconduct, restructures, or health-related matters may require a different process.
• Having the right foundations (like a clear Employment Contract and Workplace Policies) makes performance management more consistent and less stressful.

If you’d like help putting together a lawful PIP process or managing a tricky performance issue, reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.