Performance Improvement Procedures (PIP)
One of the most common scenarios which leads to a settlement agreement is the commencement of performance management procedures – aka ‘PIP’ (performance improvement plan) – for an employee. If an employer has sufficient concerns about your performance to the extent that they are willing to engage you in formal procedures, then they most likely want you to leave.
HR departments do not take the commencement of performance management procedures lightly: they take up a lot of management time and HR resources and are often undertaken in bad temper (what employee likes being told that their employer doesn’t think that they are up to the job?). So, in those circumstances, you can bet your bottom dollar that your employer feels strongly about the matter and if that’s the case, then they are almost certainly looking to move you from out of the company and replace you.
Being told that you are going to face performance management is often like being punched in the gut. No one likes being told that their work is viewed as inadequate, but what’s worse is toiling away hoping for promotion, a pay-rise or even recognition in a company that doesn’t appreciate you and in an environment which is probably doing your mental health no good.
You may think that your performance is more than adequate and you could well be correct. It could just be that your employer has taken a dislike to you for some reason and sees performance management as a way of letting you know you are no longer wanted. Sometimes, your employer may be justified in undertaking performance management, but you simply cannot see their point of view, which is understandable given that you have probably worked hard for many years and given the job all of your effort.
Performance processes mean commitment and risk for your employer too
In a performance scenario, your employer has committed to you being in employment for at least another three to six months while the performance process is completed, and this means they will need to pay your salary for that time. They have also committed to resourcing this procedure and using HR and management time to undertake what can often be quite a complicated procedure. They have also taken on a risk: a risk that they will make a mess of the procedure and end up dismissing you unfairly, and also a risk that you will pass the procedure and they could be stuck with an employee they don’t want.
Performance management as an opportunity
This is therefore an ideal situation to negotiate a settlement. Even if your employer takes you through a successful process, they will still have to pay you your notice and are likely to want to do that by paying your notice ‘in lieu’ (instead of you working) and will probably be wanting you to sign a settlement agreement in any event.
So, if you have just been told you will face performance management, or have been offered a settlement agreement as an the alternative, don’t worry unduly. Think of it as an opportunity. You are in a prime position to negotiate some money, get paid your notice, agree the form of wording for a reference and then go and do something better with your life.
What to do if you’re facing performance management procedures
The first step for you is to either accept that the writing is on the wall and therefore it’s time to move on with the best possible financial start to a new job, or alternatively, to stay and fight for your current role.
Our advice would be to think long and hard about whether you have a future with that particular employer. How many employees subject to performance management survive the process? How many go on to achieve a pay-rise or promotion? How many are happy in their role even if they survive the process?
The trust often goes between employer and employee once these matters are raised, and with that goes the future of the relationship. Of course many employees pass performance improvement plans, and many go on to remain with the company for months, even years, and if that’s what you want to do then we would always encourage you to stand and fight, bearing in mind the above caveats.
The reason why this scenario is often the best in which to achieve a settlement is that both parties want a deal. The employer at the very least recognises that there is a problem and wishes to resolve it one way or the other, and you recognise it may be time to move on rather than face performance management. Therefore, you have the basis for an agreement: two willing parties.
It is increasingly common for an HR department to invite the employee into a meeting to commence performance management procedures and then have a “without prejudice” or “protected” conversation and offer a settlement agreement before the procedure has actually commenced.
HR departments have to be careful about this because, in certain circumstances, if you are unaware of any pre-existing issues and no performance process has started, there is a possibility that the offer will not be afforded protection (i.e. the conversation will be “on the record”). If that’s the case, you will be in a stronger negotiating position as you can allege that the result of any performance management procedure is a foregone conclusion and therefore that the dismissal is potentially unfair.
Most employers get it right however and it is often legitimate to offer you an “either/or” scenario: take the money and go now with a reference, or face the uncertainty of the procedure.
The employer usually makes the first move
When you are facing performance procedures, the employer often makes the first move in a negotiation. This will probably be in the form of a meeting to discuss your performance followed by the implementation of performance procedures and may, or may not, also include a ‘protected conversation’ or ‘without prejudice’ meeting or letter.
If your employer has a protected conversation with you and makes an offer to terminate your employment rather than going through performance procedures, then you can respond to that offer by a letter. If, on the other hand, your employer wishes to commence performance procedures, but you think this is the time to leave and you want to negotiate, then you should consider putting together a suitable without prejudice letter.
Short-circuiting the performance improvement plan process
What if you approach your employer with a solution to their problem? Remove the risk of a tribunal claim, use your resignation as a negotiating tool and offer to remove yourself from the organisation, reduce the management time already committed, and all they have to do is pay you the money they would have had to pay anyway in taking you through these procedures?
This sounds ideal, and is how you should be pitching it to your employer. You should be asking for your notice paid in lieu, a reference (and this is an important reason for you to settle a performance case) and the money it would have spent on your wages during the performance procedure paid gross as an ex gratia payment.
Your argument should go something like this: ‘You, my employer, are going to take six months to conclude an uncertain process at the end of which you have to pay me notice and I will retain my rights to sue for unfair dismissal, so we should conclude this now by you paying me six months’ gross salary, my notice and giving me a reference’. Review our guide on negotiating a settlement agreement for more insight on how to structure this negotiation.
If your employer doesn’t accept your proposals, instead saying that it will more likely be three months, then it will often settle at between four and five months’ gross salary, leaving you to move on to another role with enough money to see you through.
You might also like to read:
- How much should I get in my settlement?
- How to negotiate a settlement
- 10 tips on writing without prejudice letters
- Mergers and Acquisitions
- Role Erosion
- Mental Health Absence
- Unfair dismissal
- Wrongful dismissal and gross misconduct
For all employees it’s important to read why the 2 years service threshold matters.