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employment

How long should a fair PIP last?

Key Takeaway

In New Zealand employment law, a Performance Improvement Plan (PIP) is a tool used by employers to address poor performance, forming part of a fair process. There is no legally prescribed duration for a PIP; it must be reasonable and allow a genuine opportunity for the employee to improve, adhering to the employer's good faith obligations under the Employment Relations Act 2000.

Understanding Performance Improvement Plans in New Zealand Employment Law

A Performance Improvement Plan (PIP) is a structured process used by employers to address concerns about an employee's work performance. While not explicitly defined in New Zealand legislation, PIPs are commonly used as part of an employer's obligation to act in good faith and follow fair processes when managing performance issues that could potentially lead to disciplinary action or dismissal.

The Legal Basis for Performance Management

New Zealand employment law places significant emphasis on the principles of good faith and fair process in the employment relationship.

  • Good Faith: Employers and employees are required to deal with each other in good faith [Source: Employment Relations Act 2000, s 4]. This obligation means parties must be active and constructive in establishing and maintaining a productive relationship, which includes providing employees with a genuine opportunity to improve their performance and warning them of potential consequences if performance standards are not met.
  • Fair Process: When an employer is considering taking action regarding an employee's performance, they must follow a fair process [Source: Employment Relations Act 2000, s 103A]. A fair process typically involves:
    • Clearly informing the employee of the specific performance concerns.
    • Setting clear expectations for the required improvement.
    • Providing appropriate support, training, or resources to assist the employee.
    • Giving the employee a reasonable opportunity to improve their performance.
    • Allowing the employee to provide their explanation or response to the concerns.
    • Considering all information objectively before making a decision.

Duration of a Performance Improvement Plan

New Zealand law does not specify a minimum or maximum duration for a Performance Improvement Plan. The length of a PIP must be reasonable in the specific circumstances, allowing the employee a genuine and practical opportunity to meet the required performance standards. What constitutes a 'reasonable' duration depends on various factors, including:

  • The nature and complexity of the performance issues.
  • The requirements of the employee's role.
  • The level of support and training offered.
  • The employee's previous performance history.
  • The time realistically needed for the employee to acquire new skills or change ingrained work habits.

Since there is no statutory duration, employers typically determine a timeframe that is proportionate to the issues being addressed, always keeping their good faith obligations in mind.

Employer Obligations during a PIP

When implementing a PIP, an employer has several key obligations under the principles of good faith and fair process:

  • Clear Expectations: The PIP must clearly outline the specific performance deficiencies, the required standards, and measurable goals for improvement [Source: Employment Relations Act 2000, s 4, s 103A].
  • Support and Resources: Employers should provide reasonable support, training, or resources necessary to help the employee achieve the required improvements [Source: Employment Relations Act 2000, s 4].
  • Regular Review and Feedback: Regular check-ins and constructive feedback are essential to monitor progress and adjust the plan if necessary [Source: Employment Relations Act 2000, s 4].
  • Warning of Consequences: The employee must be made aware of the potential consequences if the performance targets are not met, which could include further disciplinary action or, ultimately, dismissal [Source: Employment Relations Act 2000, s 103A].

Employee Rights during a PIP

Employees undergoing a PIP also have rights, consistent with the principles of natural justice and good faith:

  • Right to Respond: Employees have the right to understand the concerns, respond to them, and provide their perspective or explanation [Source: Employment Relations Act 2000, s 103A].
  • Right to Support: Employees are entitled to reasonable support and resources to help them improve [Source: Employment Relations Act 2000, s 4].
  • Right to Representation: An employee can have a representative (e.g., a union delegate or a support person) present at meetings related to their performance management [Source: Employment Relations Act 2000, s 4].

Unjustified Disadvantage or Dismissal

If an employee believes that the performance management process, including the PIP, was unfair or unreasonable, they may be able to raise a personal grievance [Source: Employment Relations Act 2000, s 103]. A personal grievance is a claim by an employee against their employer for an alleged unjustified dismissal, disadvantage, discrimination, or other breaches of employment law. The Employment Relations Authority (ERA) is a specialist tribunal that investigates and resolves employment relationship problems.

When to Seek Independent Legal Advice

If an employer or employee has questions about performance management processes, the implementation or duration of a Performance Improvement Plan, or believes that a process has been unfair or unjust, it is advisable to seek independent legal advice. Information and assistance can be obtained from organisations such as Community Law Centres, or through relevant government agencies like Employment New Zealand.

Key Resources