Being placed on a Performance Improvement Plan (PIP) can feel like the beginning of the end.
The employee thinks, “They have already decided to fire me.” The employer thinks, “Once the PIP ends, we can terminate.”
Legally, neither assumption is entirely correct under Malaysian employment law.
A PIP should be a genuine opportunity for an employee to improve. It may support a later dismissal for poor performance, but only if the targets, support and assessment were fair.
What Is a Performance Improvement Plan?
A Performance Improvement Plan is a formal process used when an employee is not meeting the standard reasonably expected for their role.
It usually sets out:
- the areas of poor performance;
- what the employee must improve;
- the targets to be achieved;
- how performance will be measured;
- the support provided;
- the review period; and
- what may happen if the employee fails.
Malaysian employment legislation does not expressly require employers to use a PIP. However, a properly managed PIP can show that the employee was warned and given a reasonable opportunity to improve before dismissal.
When Should an Employer Use a PIP?
A PIP is generally suitable for performance problems such as:
- repeatedly missing reasonable targets;
- failing to meet deadlines;
- producing work containing persistent errors;
- failing to maintain service standards; or
- struggling to perform essential responsibilities.
Poor performance is not necessarily misconduct.
An employee who tries but cannot meet a sales target may have a performance problem. An employee who deliberately refuses to contact customers may be committing misconduct.
In Tan Poh Thiam v Industrial Court of Malaysia [2015] MLJU 974, the Court of Appeal cautioned against treating every form of poor performance, negligence or unsatisfactory conduct as misconduct.
The distinction matters because poor performance should ordinarily be addressed through guidance, warnings and an opportunity to improve – not immediate disciplinary dismissal.
Can an Employee Be Dismissed After a PIP?
Yes, but merely completing a PIP does not automatically make the dismissal fair.
In Ireka Construction Berhad v Chantiravathan a/l Subramaniam James [1995] 2 ILR 11, the Industrial Court set out three commonly cited requirements for a performance-related dismissal:
- the employee was warned about their poor performance;
- the employee received sufficient opportunity to improve; and
- despite that opportunity, the employee failed to improve sufficiently.
A PIP may help establish these requirements. However, the employer must still prove that the performance concerns were genuine and that the process was fair.
If you need help preparing, reviewing or responding to a Performance Improvement Plan , feel free to get in touch. You can also explore Employment Law Malaysia: The Complete Guide for Employees and Employers (2026) for practical articles covering workplace rights, disciplinary procedures, termination and unfair dismissal claims.
What Should a Fair PIP Contain?
1. Clear performance concerns
The PIP should explain what the employee is doing poorly.
“Your performance is unsatisfactory” tells the employee very little. A useful PIP should provide actual examples, such as missed deadlines, verified errors or unmet targets.
2. Reasonable targets
Targets should be clear, measurable and realistically achievable.
For example, “improve your attitude” is vague. “Submit the monthly report by the fifth working day” is much easier to understand and assess.
Targets may be questionable if:
- they are impossible to achieve;
- they are much higher than those imposed on colleagues;
- the employee lacks the necessary resources;
- the employee was moved into an unfamiliar role without training; or
- management keeps changing the target whenever the employee improves.
A PIP should provide a route towards success, not guarantee failure.
3. Employer support
The plan should identify what support the employee will receive.
This may include training, coaching, closer supervision, clearer priorities or access to the tools required for the job.
The employer does not have to perform the employee’s work. However, it should provide reasonable assistance related to the shortcomings identified.
4. Sufficient time
There is no legally prescribed minimum duration for a PIP in Malaysia.
Thirty, sixty and ninety-day plans are common, but they are not legal rules.
The appropriate period depends on the role and how quickly improvement can reasonably be measured. A sales employee may need several sales cycles, while an administrative problem may be assessed more quickly.
5. Regular reviews
The employer should not issue a PIP and remain silent until the last day.
Review meetings allow both sides to discuss progress, difficulties and any additional support required. The employee should be told whether they are improving or remain below the expected standard.
What Are the Warning Signs of an Unfair PIP?
Not every difficult PIP is unfair. However, possible red flags include:
- vague allegations without examples;
- unrealistic or constantly changing targets;
- an unreasonably short review period;
- no training or support;
- removing resources needed to meet the targets;
- ignoring improvements;
- inventing new shortcomings whenever targets are achieved;
- pressuring the employee to resign; or
- making it clear that dismissal is inevitable.
In Lee Hsin Ying v Sleekflow Technologies Sdn Bhd, Industrial Court Award No. 55 of 2026, the Court found that a rushed PIP involving unrealistic sales expectations and no meaningful opportunity to improve did not justify dismissal.
The lesson is simple: the Court will examine how the PIP actually operated, not merely whether a document titled “PIP” existed.
Must an Employee Sign the PIP?
Signing a PIP does not necessarily mean that the employee agrees with every allegation.
An employee may acknowledge receipt while recording:
“Acknowledged receipt only. I reserve my right to respond to the contents.”
Refusing to sign will not usually stop the employer from proceeding. A more practical approach is to acknowledge receipt and respond in writing to any inaccurate or unreasonable requirements.
What Should an Employee Do During a PIP?
An employee placed on a PIP should:
- ask for specific examples of poor performance;
- request clarification of vague targets;
- raise unrealistic expectations promptly;
- ask for the promised training or resources;
- attend review meetings;
- keep evidence of completed work;
- confirm important discussions by email; and
- respond professionally to inaccurate assessments.
Even if the employee believes the PIP is designed to remove them, ignoring it is rarely helpful. The employee can dispute an unfair process while still making a genuine effort to improve.
What If the Employee Partly Improves?
The employer should assess partial improvement honestly.
Relevant questions include:
- Which targets were achieved?
- How significant is the remaining gap?
- Was the employee given sufficient support?
- Is further improvement reasonably likely?
- Would a short extension be appropriate?
The employer is not required to extend every unsuccessful PIP. However, changing the goalposts after the employee achieves the original targets may suggest that the outcome was predetermined.
Do PIPs Apply to Probationers?
Yes. Probationary employees may also be placed on a PIP or another structured performance review.
Probation allows an employer to assess suitability, but it does not permit arbitrary dismissal.
In Khaliah Abbas v Pesaka Capital Corporation Sdn Bhd [1997] 3 CLJ 827, the Court of Appeal confirmed that probationers are also protected against dismissal without just cause or excuse.
A probationer may not require the same lengthy process as a long-serving confirmed employee. However, the employer should still identify the shortcomings, provide reasonable guidance and conduct an honest assessment.
Can a PIP Be Used to Force an Employee to Resign?
A PIP should not be used to pressure an employee into resigning.
Potential concerns arise where the employer:
- says resignation is the only realistic option;
- removes the employee’s responsibilities or resources;
- sets impossible targets;
- repeatedly threatens dismissal; or
- refuses to recognise genuine improvement.
An unfair PIP does not automatically amount to constructive dismissal. The employee must still prove that the employer committed a fundamental breach of the employment contract and that they resigned because of it.
Employees considering resignation should obtain advice first. Constructive dismissal claims can be difficult to establish.
Can an Employee Challenge a Dismissal After a PIP?
Yes.
An employee who considers that they were dismissed without just cause or excuse may file a representation under section 20 of the Industrial Relations Act 1967.
The representation must generally be filed within 60 days of dismissal.
The Industrial Court may consider:
- whether the employee genuinely performed poorly;
- whether the targets were reasonable;
- whether warnings were given;
- whether support was provided;
- whether the PIP lasted long enough;
- whether progress was assessed fairly; and
- whether dismissal was already predetermined.
A completed PIP will not protect an employer if the process was merely designed to create paperwork for dismissal.
Final Thoughts
A Performance Improvement Plan should do what its name suggests: help the employee improve.
For employers, a well-managed PIP creates a fair opportunity to correct performance problems and provides reliable evidence if improvement does not happen.
For employees, it provides clear targets and a chance to demonstrate that they can meet the required standard.
The important question is not simply whether a PIP was issued. It is whether the process was genuine, reasonable and conducted in good faith.
To learn more about Malaysian employment law, read Employment Law Malaysia: The Complete Guide for Employees and Employers (2026) where I explain key concepts in plain English.
This article provides general information and does not constitute legal advice. Each matter depends on its particular facts, documents and employment terms.
