Managing Employee Performance

Performance Improvement Plans (PIPs): A Guide for Small Businesses

A performance improvement plan (PIP) is a formal document small businesses use to address employee performance problems with clear expectations, timelines, and support. When used correctly, a PIP gives an employee a genuine opportunity to improve while creating the documentation you need if termination becomes necessary. This guide explains when to use a PIP, what it must include, how to deliver it, and how it differs from progressive discipline.

What you’ll learn in this guide

In this guide you'll learn:

  • When to use a PIP vs. progressive discipline
  • The six sections every effective PIP must include
  • How long a PIP should last
  • How to deliver a PIP conversation professionally
  • What to do if the employee does not improve
  • Common legal mistakes small businesses make with PIPs

PIP vs. progressive discipline: knowing the difference

These two tools are often confused, and using the wrong one for the situation is a common mistake that creates both management headaches and legal exposure.

Use a PIP when...

  • An employee is struggling to meet job performance expectations
  • The issue is capability, not conduct or willingness
  • The employee generally follows rules but cannot keep up with the role
  • You genuinely want to give the employee a chance to succeed

Use progressive discipline when...

  • An employee is violating a policy or behavioral rule
  • The issue is behavior or attitude, not capability
  • There are attendance, tardiness, or conduct problems
  • The employee knows the rules and is choosing not to follow them

A new hire who simply is not keeping up with the job is a PIP candidate. An employee who is consistently late, disrespectful, or violating your social media policy is a progressive discipline candidate. See our full comparison in how to write a performance improvement plan.

What to include in a performance improvement plan

A PIP that lacks specificity is nearly useless, both legally and practically. Each section below is required for the document to hold up.

Section 1

Performance concerns, specific and documented

List the exact performance gaps with dates, examples, and where possible, numbers. "Not meeting expectations" is not sufficient. "Sales target for Q1 was 20 units; actual was 9 units" is. Be specific enough that the employee cannot reasonably claim they did not understand the problem.

Section 2

SMART expectations going forward

State exactly what improvement looks like in measurable terms. Specific, Measurable, Achievable, Relevant, and Time-bound goals prevent a PIP from becoming a moving target. "Improve customer satisfaction scores" is not a SMART goal. "Achieve a customer satisfaction score of 4.0 or higher by the end of the 60-day plan period" is.

Section 3

Timeline

30, 60, and 90 days are the most common PIP durations. Choose a timeframe long enough to give the employee a realistic chance to improve, but not so long that you are managing a failing situation for months. The right duration depends on the complexity of the performance gap and your business needs.

Section 4

Resources and support you will provide

List any training, coaching, or additional manager time you will provide to help the employee succeed. This section matters both for genuine employee support and for legal defensibility. It demonstrates you gave the employee a fair opportunity to improve.

Section 5

Check-in schedule

Define how often you will meet to review progress. Weekly or bi-weekly check-ins are standard. These meetings create a record of ongoing feedback and give you an early warning if the employee is falling behind.

Section 6

Consequences of non-improvement

Be explicit that failure to meet the expectations in the PIP may result in further disciplinary action, up to and including termination. Do not soften this language. The employee needs to understand the stakes, and this language protects you if termination follows.

Download the PIP template

Our Performance Improvement Plan template includes all six sections above, a progress tracking form, and manager guidance notes for conducting check-in conversations.

Get the PIP Template

How to deliver a PIP

The delivery conversation matters as much as the document itself. A poorly handled PIP meeting makes an already difficult situation worse. Have the conversation in a private, scheduled meeting, not a hallway drop-in. Bring the document and walk through it together. Be direct and honest without being harsh. Give the employee time to respond and listen to their perspective. Have them sign the document at the end of the meeting, and if they refuse, document the refusal.

For guidance on the performance conversation itself, see our article on performance conversations for first-time managers.

Common mistake: Using a PIP as a paper trail with no genuine intention of keeping the employee. Employees, juries, and employment attorneys can usually tell when a PIP was designed to fail. If you have already decided to terminate, it is often cleaner and more honest to do it directly, with documented reasons, than to put someone through a pretextual process.

When a PIP does not result in improvement

If the employee does not meet the PIP goals by the end of the plan period, your next steps depend on how close they came and what your judgment says about their trajectory. Options include extending the PIP if there has been real progress, issuing a final written warning with a shorter extension, or proceeding to termination if there has been little to no improvement.

Whatever you decide, document your reasoning and make sure it is consistent with how you have handled similar situations. Our article on what to do when a new hire is not working out covers a common PIP scenario in detail. When termination follows a failed PIP, see our guide on how to conduct a termination meeting.

Frequently asked questions

Is putting someone on a PIP the same as firing them?

Not necessarily, but employees often interpret it that way. A genuine PIP is a tool for improvement and some employees do succeed. That said, if you are putting someone on a PIP primarily to document a path to termination, it is worth asking yourself whether a PIP is the right tool or whether a direct termination conversation is more appropriate.

How long should a PIP be?

30 to 90 days is the typical range. For complex performance issues that require learning new skills, 60 to 90 days is more appropriate. For clear-cut, easily measurable gaps, 30 days may be sufficient. The timeline should be long enough to be fair but not so long that you are stuck managing a situation that is not improving.

Can I put an employee on a PIP while they are on FMLA leave?

This is a legally sensitive area. Generally, you cannot begin a PIP during FMLA leave or count FMLA-protected absences as performance issues. Consult an employment attorney before starting a PIP for an employee on or recently returned from FMLA. See our article on managing employees on FMLA.

Does an employee have to sign a PIP?

No. If they refuse to sign, note the refusal on the document, have a witness sign it, and retain it in the employee's file. You can also ask the employee to write "received but do not agree" if they want to note disagreement while acknowledging receipt.

Performance Improvement Plan resources for small businesses

Articles

Templates

This guide is part of our broader resource on Managing Employee Performance, which covers progressive discipline, performance improvement plans, and termination best practices for small employers.