October 23, 2026
A performance improvement plan is a written plan that tells an underperforming employee exactly what has to improve, by when, how you'll measure it and what happens if it doesn't. You don't legally need one to let an at-will employee go, but a fair, documented process is good management and your best evidence if the employee later claims discrimination or retaliation. A good PIP sets specific, measurable goals over 30 to 60 days, schedules check-ins, lists the support the company will provide and states the consequence plainly. Skip it for misconduct or an eliminated role, and be careful with timing if the employee has recently complained, asked for leave or asked for an accommodation.
Key takeaways
A performance improvement plan is a short document, typically two or three pages, that names the performance gap, sets the goals that will close it, sets a deadline and describes what happens if the goals aren't met. The employee signs to acknowledge receipt, not agreement.
You don't need one. Most US employment is at will, so the company can end employment for any lawful reason or no reason, with or without notice. What a PIP gives you is a record. If a former employee claims they were fired because of their race, age, disability or a complaint they made, the company has to show a legitimate reason, and a contemporaneous, specific plan with measured results is far stronger evidence than a manager's recollection. A fair process is also better management. People sometimes improve when expectations are finally clear, and the rest of your team sees how you treat people.
A PIP fits when the problem is performance, the person has the basic skills for the role, and you'd genuinely be glad if they hit the goals. It's also realistic at a very early-stage startup, where a focused 30-day plan is affordable and outcomes are easy to measure.
Skip it in three situations. For misconduct, such as harassment, dishonesty or a security breach, investigate and act; a PIP signals the conduct is a performance gap that can be coached. When the role no longer exists because of a pivot or a reduction in force, a PIP is a pretext, and pretexts are what plaintiffs' lawyers look for. And when you've already decided, a PIP designed to fail wastes 60 days and creates documents that contradict the real reason. In that case, move to a separation with severance and a release. See Startup Severance: Is It Required, and What's Standard?
Start with specific, measurable goals tied to the role. "Improve communication" can't be measured; "send a written status update on each open project every Friday" can. Two to four goals is plenty. Each should connect to expectations the employee already knew, from the job description, the offer, onboarding or prior reviews, which is one reason to set expectations clearly from the start. See Employee Onboarding for Startups.
Set a timeline of 30 to 60 days, long enough that improvement is possible. Put check-in dates in the document, usually weekly or every two weeks, and write a short note after each one. List the resources the company will provide, such as training, more frequent feedback or a mentor, and then provide them. State the consequence plainly: if the goals aren't met by the end date, employment may be terminated. Close with the employee's signed acknowledgment that they received the plan, with room for their comments.
Timing around protected activity. If a PIP arrives shortly after the employee complained about discrimination or harassment, reported a safety or wage problem, requested leave, disclosed a pregnancy or asked for an accommodation, it will look like retaliation. Close timing alone isn't always enough to prove retaliation, but it's the first thing an agency or a plaintiff's lawyer will point to. If the performance problem predates the protected activity, make sure the earlier documentation exists, and talk to counsel before you start the plan.
Consistency. Hold the employee to the same standard as peers in the same role. If two salespeople missed quota and only one is on a PIP, you need a reason that has nothing to do with a protected characteristic. A compensation philosophy with clear levels and expectations helps here. See What Is a Startup Compensation Philosophy?
Disability and accommodation. If the employee has told you about a disability and the performance problem may be connected to it, the Americans with Disabilities Act (at employers with 15 or more employees) and many state laws require an interactive process to find a reasonable accommodation. You can still hold an accommodated employee to the same performance standards, but you can't skip the accommodation conversation.
Leave. Time on protected leave, such as the federal Family and Medical Leave Act (at employers with 50 or more employees) or state paid leave and sick leave laws, can't count against the employee. Pause the PIP clock during leave and restart it on return.
Documentation. Write notes at the time, describe facts rather than character ("missed the March 15 deadline" rather than "lazy"), and keep personal opinions, health speculation and anything about age, family or other protected traits out of emails, Slack and the PIP itself. Assume a judge will read every word.
Who's in the room. The manager delivers the plan, ideally with a second person, such as a founder or the person handling HR, who takes notes. Keep the meeting short and factual.
Since the Supreme Court's 2024 decision in Muldrow v. City of St. Louis lowered the harm needed for a discrimination claim, a PIP that cuts pay, removes duties or blocks a promotion may be challenged on its own, so don't attach those changes to the plan without advice. See What Should Founders Know About Startup Employment Law?
There are three outcomes. If the employee met the goals, say so in writing and close the plan, and make clear the standard continues. If they made real progress but fell short, you can extend the plan once, for a defined period, with the same goals. If they didn't improve, end employment on the stated terms. Offering a modest severance in exchange for a release is common even after a PIP, because it closes off claims. Follow your state's final pay rules, including commissions and accrued vacation. See What Do I Need to Do When an Employee Is Fired?
Equity keeps vesting during a PIP, because the person is still employed. If employment ends, the termination date controls: options or shares vested by that date are kept under the grant's terms, and everything unvested is forfeited. A termination timed just before a vesting cliff will be scrutinized, so document why the date is what it is. If you have an employee handbook, follow whatever performance process it describes. See Startup Employee Handbook.
Example. An account executive was hired seven months ago with a quarterly quota of $150,000 of new annual recurring revenue (ARR). In the last two quarters she closed $60,000 (40% of quota) and $55,000 (about 37%). Peers in the same role averaged 85%.
Her manager starts a 60-day PIP running from March 1 through April 29. The pro-rated quota for 60 days of a 90-day quarter is $100,000 ($150,000 × 60 ÷ 90). The PIP sets two goals: close at least $75,000 of new ARR (75% of the pro-rated quota) and build $300,000 of qualified pipeline (three times the pro-rated quota) in the CRM by April 29. Check-ins are set for March 15, March 29, April 12 and April 26. The company provides a weekly deal review with the CEO and warm introductions to 20 target accounts. The plan states that missing either goal may result in termination, and she signs to acknowledge receipt.
She received 40,000 options with a 1-year cliff at hiring. Nothing has vested yet, and vesting continues during the PIP. If she misses the goals and her employment ends on April 30, all 40,000 options are forfeited. Her commission on any deal closed before that date is paid under the written commission plan, on the final pay deadline in her state.
For more, see What Do I Need to Do When an Employee Is Fired?, Startup Severance: Is It Required, and What's Standard?, Startup Employee Handbook and What Should Founders Know About Startup Employment Law?
If you're about to put someone on a PIP and something about the timing worries you, contact us.
