A Performance Improvement Plan (PIP) is a structured HR tool that provides employees with performance deficiencies clear goals, measures, and a timeframe for improvement. In Germany, the PIP often serves as a precursor to a formal warning or termination, which is why both employers and employees should understand their rights and obligations. A well-documented PIP with SMART goals and regular feedback can help resolve performance issues – or prepare a legally sound separation.
What Is a Performance Improvement Plan?
Definition and Purpose
A Performance Improvement Plan is a formal document that employers use to systematically address employee performance deficiencies. The PIP identifies specific areas requiring improvement, defines measurable goals, and sets a binding timeframe.
The original purpose of a PIP is supportive: it aims to give employees the opportunity to improve their performance before further measures are taken. In practice, however, companies also use the PIP to document performance shortcomings and legally safeguard a potential termination.
Typical Contents of a PIP
A complete Performance Improvement Plan typically includes the following elements:
- Description of performance deficiencies: Specific, documented examples of inadequate work results
- Expected performance standards: Clear definition of what performance is expected going forward
- SMART goals: Specific, measurable, achievable, relevant, and time-bound improvement objectives
- Support measures: Training, coaching, or other assistance from the employer
- Timeframe: Usually 30, 60, or 90 days
- Consequences: Potential outcomes if goals are not met (e.g., formal warning, termination)
- Feedback meetings: Regular check-ins to monitor progress
Legal Framework in Germany
PIPs Under German Employment Law
German employment law does not recognize the term "Performance Improvement Plan" as an independent legal instrument. The PIP is rather a management tool adopted from Anglo-Saxon business practice that companies use voluntarily.
The PIP becomes legally relevant primarily in the context of dismissal protection. Under the German Protection Against Dismissal Act (Kündigungsschutzgesetz, KSchG), a termination must be socially justified – and a documented PIP can serve as evidence that the employer has exhausted milder measures before proceeding with dismissal.
Distinction: PIP vs. Formal Warning
A Performance Improvement Plan is not a formal warning (Abmahnung) in the legal sense. A formal warning is an official reprimand that criticizes specific misconduct and threatens consequences in case of repetition. It is typically a prerequisite for a conduct-related dismissal.
The PIP, on the other hand, is a development tool. It can precede a formal warning, replace it, or be used in parallel. Important to note: A PIP alone does not meet the legal requirements of a formal warning. If you as an employer want to prepare a conduct-related dismissal, you should issue a formal warning in addition to the PIP.
Requirements for Termination Due to Poor Performance
Termination due to poor work performance – so-called low performance – faces high hurdles in Germany. According to the case law of the Federal Labor Court (Bundesarbeitsgericht, BAG):
- Significant underperformance: Performance must be at least one-third below the average performance of comparable colleagues over an extended period.
- Full burden of proof on the employer: The employer must specifically demonstrate and prove the underperformance.
- Last resort principle (Ultima Ratio): Termination may only be the last resort. Milder measures such as discussions, training, or transfers must be considered first.
- Distinction between "won't" vs. "can't": For conduct-related underperformance (employee could perform better but won't), a formal warning is required. For person-related underperformance (employee wants to perform better but can't), no formal warning is necessary, but the employee must be informed of the performance deficiencies.
Structure of a Performance Improvement Plan
Formulating SMART Goals
For a PIP to be effective, the defined goals must follow the SMART principle:
- Specific: "Process at least 15 customer inquiries per day" instead of "Work more"
- Measurable: Quantifiable metrics such as quantities, error rates, or processing times
- Achievable: Goals that are attainable and motivate the employee
- Realistic: Requirements that can be fulfilled under normal conditions
- Time-bound: Clear deadlines for interim and final results
Vague formulations like "better communication" or "more engagement" are not suitable. They can neither be measured nor enforced in court.
Timeframe: 30, 60, or 90 Days
The duration of a PIP depends on the type and extent of performance deficiencies:
- 30 days: For clearly defined, quickly measurable improvement goals (e.g., meeting deadlines)
- 60 days: Standard duration for most PIPs
- 90 days: For more complex deficiencies requiring training or longer adjustment periods
Timeframes that are too short can render the PIP ineffective, as they don't give the employee a fair chance to improve. The Federal Labor Court has emphasized in several rulings that the set periods must be reasonable.
Defining Support Measures
A fair PIP describes not only the deficiencies but also the support the employer offers. This may include:
- Regular feedback sessions (weekly or bi-weekly)
- Training and professional development
- Mentoring by experienced colleagues
- Adjustment of working conditions (if they contribute to underperformance)
- Coaching or external consultation
These measures document that the employer is fulfilling their duty of care – an important aspect for legal protection.
PIP from the Employer's Perspective
When Is a PIP Appropriate?
A Performance Improvement Plan is the right tool when:
- Performance issues need to be documented and addressed
- A fair chance for improvement should be given
- A potential termination needs to be legally prepared
- Clear expectations and consequences need to be communicated
A PIP is not appropriate if separation is already inevitable. In that case, the PIP would only be a delay and could be perceived as dishonest.
Documentation and Legally Sound Implementation
For legally sound implementation, you should consider the following points as an HR professional:
- Before the PIP: Have a conversation addressing the performance issues
- Put the PIP in writing: Document all goals, measures, and deadlines
- Obtain signatures: Ideally from the employee, manager, and HR
- Regular check-ins: Record progress in writing
- Final evaluation: Document the outcome (successful, partially successful, unsuccessful)
Involving the HR department and, if applicable, the legal department from the beginning is recommended.
Avoiding Common Mistakes
Common mistakes in PIP implementation include:
- Unclear goals: Vague formulations that cannot be measured
- Unrealistic expectations: Goals that even top performers couldn't achieve
- Lack of support: No concrete assistance offered
- Poor documentation: No written records of meetings
- No real chance: The PIP is only carried out pro forma
PIP from the Employee's Perspective
Do I Have to Sign a PIP?
No, there is no legal obligation to sign a Performance Improvement Plan. The signature merely confirms acknowledgment – it does not mean you agree with the allegations.
If you don't sign the PIP, the employer can still implement it as a unilateral directive. The goals then still apply, although legal enforceability may be reduced in case of dispute.
Tip: Have the PIP reviewed legally before signing. You can also sign with the addition "acknowledged" to clarify that you don't automatically accept the contents.
Rights and Options for Action
As an employee, you have the following rights regarding a PIP:
- Statement: You can provide a written account of your perspective
- Involve the works council: If available, the works council can advise and support you
- Legal consultation: Employment lawyers can review the legality of the PIP
- Demand realistic goals: If goals are unachievable, you should object in writing
- Request support: The employer must help you achieve the goals
If you consider the PIP unjustified or containing unrealistic goals, you should seek legal advice early – ideally before the deadline expires.
Frequently Asked Questions About Performance Improvement Plans
What Is a Performance Improvement Plan (PIP)?
A Performance Improvement Plan is a formal document for performance improvement. It defines deficiencies, sets goals, establishes measures, and provides a timeframe – typically 30, 60, or 90 days. Signatures from both parties are common but not mandatory.
Do I Have to Sign a PIP as an Employee?
No, there is no legal obligation to sign. The signature only confirms acknowledgment, not agreement with the allegations. Without a signature, the PIP is considered a unilateral directive from the employer. Legal consultation before signing is recommended.
Is a PIP a Formal Warning?
No, a PIP does not replace a formal warning under employment law. While the PIP is a development tool, the formal warning represents an official reprimand. Before a conduct-related dismissal, a formal warning is typically required – the PIP alone is not sufficient.
How Long Does a Performance Improvement Plan Last?
The typical duration is between 30 and 90 days, depending on the type and extent of deficiencies. The timeframe must be reasonable and provide a genuine opportunity for improvement. Timeframes that are too short can render the PIP ineffective.
What Happens If I Don't Pass the PIP?
Possible consequences include a formal warning, transfer, or in extreme cases, termination. However, termination requires additional prerequisites under the Protection Against Dismissal Act. The employer must demonstrate that they considered milder measures. Many terminations for underperformance are successfully challenged in court.
Can I Be Dismissed for Poor Performance?
Yes, but the hurdles are high. According to Federal Labor Court case law, performance must be at least one-third below the average of comparable colleagues over an extended period. The employer bears the full burden of proof. For conduct-related underperformance, a formal warning is required; for person-related underperformance, it is not.
What Goals Should Be Included in a PIP?
A PIP should contain SMART goals: specific, measurable, achievable, relevant, and time-bound. This includes concrete performance indicators (KPIs), clearly described behavioral changes, and defined support measures such as training or coaching.
How Do I Create a Legally Sound PIP?
For a legally sound PIP, you should identify deficiencies specifically and verifiably, set realistic and measurable goals, choose an appropriate timeframe, and offer support. Document all conversations in writing and involve HR and, if applicable, the legal department.
Conclusion
The Performance Improvement Plan is a double-edged instrument: Used correctly, it can help employees overcome performance issues and stay with the company. Applied incorrectly, it serves as a precursor to termination without offering genuine chances for improvement.
For employers: A PIP must be fair, documented, and legally sound. Unrealistic goals or lack of support can render it ineffective – and cause a termination based on it to fail in court.
For employees: Take a PIP seriously, but don't let yourself be pressured. Review the goals for feasibility, demand support, and seek legal advice if needed.
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Sources
- Protection Against Dismissal Act (Kündigungsschutzgesetz, KSchG). Federal Ministry of Justice, 2024.
https://www.gesetze-im-internet.de/kschg/ - German Civil Code § 611a Employment Contract (BGB). Federal Ministry of Justice, 2024.
https://www.gesetze-im-internet.de/bgb/__611a.html - Federal Labor Court case law on underperformance. Bundesarbeitsgericht, 2003.
https://www.bundesarbeitsgericht.de - Seidler, Christoph: Low Performers and Improvers in Employment Law. Human Resources Manager, 2025.
https://www.humanresourcesmanager.de/arbeitsrecht/low-performer-und-improver/ - Byers, Philipp: Termination of Low Performers. BDU, 2016.
https://www.bdu.de/newsletter/ausgabe-32016/low-performer-im-unternehmen-worauf-arbeitgeber-achten-sollten/
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