1) Why PIPs matter in Philippine employment law

A Performance Improvement Plan (PIP) is a structured, time-bound program used by employers to address an employee’s performance gaps through clear targets, coaching, and monitoring. In the Philippines, a PIP is not specifically required by the Labor Code, but it often becomes crucial evidence in disputes because the Constitution and labor laws strongly protect security of tenure—meaning employees may be dismissed only for just or authorized causes and with due process.

Used properly, a PIP can help show that:

performance standards were clear and reasonable,
the employee knew the shortcomings,
the employer acted in good faith (coaching, support, time to improve),
continued poor performance became serious and repeated enough to justify termination under a lawful ground.

Used poorly, a PIP can backfire as evidence of:

shifting or impossible standards,
discrimination or retaliation,
a “paper trail” meant to force resignation,
denial of genuine opportunity to improve.

2) Core legal framework (private sector)

2.1 Security of tenure + management prerogative

Philippine labor law balances:

Security of tenure (employees are protected from arbitrary dismissal), and
Management prerogative (employers may set standards, evaluate performance, and discipline, as long as lawful, reasonable, and done in good faith).

A PIP sits inside management prerogative—but it cannot override security of tenure or due process requirements.

2.2 Grounds for termination under the Labor Code

Performance-related exits usually fall under just causes, not authorized causes.

Just causes (Labor Code, commonly cited as Art. 297 [formerly Art. 282]) include:

serious misconduct,
willful disobedience,
gross and habitual neglect of duties,
fraud / willful breach of trust,
commission of a crime against the employer or its representatives,
other analogous causes.

Authorized causes (commonly Art. 298 [formerly Art. 283]) include:

redundancy,
retrenchment,
closure or cessation of business,
installation of labor-saving devices.

Disease is a separate authorized cause (commonly Art. 299 [formerly Art. 284]) with specific medical certification requirements.

Key point: “Poor performance” is not listed verbatim as a just cause in the Labor Code, but it is commonly litigated as part of gross and habitual neglect, or sometimes as an analogous cause, depending on the facts and the role.

3) What a PIP is (and what it is not)

3.1 Typical characteristics of a PIP

A defensible PIP is usually:

Specific: identifies measurable gaps (quality, accuracy, productivity, deadlines, competencies).
Time-bound: e.g., 30/60/90 days depending on role and learning curve.
Supported: training, coaching, tools, mentoring, clearer workflows.
Documented: baseline metrics, weekly check-ins, written feedback.
Fair: considers workload, territory/assignment changes, system issues, staffing, and whether metrics are within the employee’s control.

3.2 What a PIP is NOT

Not a substitute for due process. Completion of a PIP does not automatically make termination lawful.
Not an authorized cause process. PIPs do not replace redundancy/retrenchment rules.
Not a resignation tool. Using a PIP to pressure someone to resign risks constructive dismissal.

4) The two pillars: substantive due process and procedural due process

Philippine illegal dismissal cases generally turn on two questions:

Substantive due process: Was there a valid cause (just or authorized)?
Procedural due process: Was the correct procedure followed?

Failure in either can trigger employer liability—sometimes full illegal dismissal consequences, sometimes damages.

5) Substantive rules: When poor performance can justify dismissal

5.1 The legal theory most often used: “gross and habitual neglect”

To justify dismissal under gross and habitual neglect, employers typically must show:

Gross: the deficiency is serious and significant (not minor mistakes).
Habitual: repeated over time, not a one-off incident.
Work-related: connected to essential duties, with meaningful impact.

A PIP helps support “habitual” and “gross” by documenting:

recurring failures,
repeated coaching,
continued inability/unwillingness to meet reasonable standards.

5.2 A practical test used in disputes

While exact wording varies across decisions, performance-based termination is strongest when the employer can prove:

Clear standards existed (KPIs, quality standards, deadlines, competency expectations).
Standards were communicated (job offer, handbook, KPIs, scorecards, onboarding).
Standards were reasonable for the role and consistent with business needs.
Evaluation was fair and evidence-based (not arbitrary; comparable calibration; accurate data).
Employee had reasonable opportunity to improve (time + coaching + resources).
Deficiencies persisted despite support, and materially affected the business.

A PIP is often the container where these elements are demonstrated—if it is properly designed.

5.3 Common performance scenarios and how they’re assessed

a) Quality/accuracy failures (errors, compliance misses, rework)

Stronger case if errors are repeated, documented, and tied to core duties.
Stronger if the employer shows training and clear quality thresholds.

b) Productivity / quotas

Stronger if targets are realistic, role-appropriate, and consistently applied.
Weaker if targets shift mid-stream, depend on factors outside employee control (leads, territory changes, system downtime), or are selectively enforced.

c) Attendance disguised as performance

Chronic lateness/absences is usually handled under attendance policies and discipline, not a PIP. Mixing frameworks can confuse the legal basis.

d) Behavioral/competency gaps (communication, leadership, collaboration)

Stronger if anchored in observable behaviors, documented incidents, and specific expectations—not personality judgments.

5.4 “Loss of trust and confidence” vs. performance

For managerial or fiduciary roles, employers sometimes use loss of trust and confidence when performance issues overlap with judgment, reliability, or risk. This ground has its own standards and typically requires:

a position of trust, and
a factual basis (not mere suspicion).

A PIP can support competence concerns but cannot replace the need for a factual basis if the employer alleges breach of trust.

6) Procedural due process: The mandatory steps (just cause termination)

Even if poor performance is serious, termination can still be defective if procedure is not followed.

6.1 The “two-notice rule” + opportunity to be heard

For just cause termination, Philippine rules require:

First written notice (Notice to Explain / Charge Sheet) Must specify:
- the acts/omissions complained of (with dates, metrics, instances),
- the rule/standard violated (policy, KPI, duty),
- the possible penalty (including termination, if applicable),
- a directive to submit a written explanation within a reasonable period (commonly at least 5 calendar days is used in practice and jurisprudence).
Genuine opportunity to be heard This can be:
- an administrative conference,
- a hearing (especially if requested, or if facts are disputed),
- a meeting where the employee can explain, present evidence, and respond to documents.
Second written notice (Notice of Decision) Must inform the employee:
- that termination (or other penalty) is imposed,
- the grounds and supporting facts,
- the effective date.

A PIP does not automatically satisfy the first notice requirement unless it is drafted and served as a disciplinary notice meeting the content requirements above. Many PIPs are developmental documents; those typically should not be treated as the legal “first notice” unless designed that way.

6.2 What “opportunity to be heard” means in practice

Due process is not always a full trial-type hearing, but it must be real:

The employee must have a chance to respond meaningfully.
The decision-maker should consider the explanation.
The process should not be a pre-decided formality.

If the employee requests a hearing or the issues involve disputed facts, holding a conference/hearing is generally the safer path.

6.3 Common timeline patterns (illustrative)

Performance issues identified → coaching, counseling memo, then PIP
If failure continues and employer is moving toward termination for just cause:
- Issue Notice to Explain (with performance evidence)
- Wait for explanation period
- Conduct conference/hearing
- Issue Notice of Decision

Some employers run a PIP first, then begin due process if the PIP fails. Others integrate discipline earlier. The legally critical point is: before termination for just cause takes effect, the two-notice rule and opportunity to be heard must be satisfied.

7) Authorized causes: When PIP is the wrong tool

If the real reason is business-driven (e.g., redundancy, retrenchment), the employer must use authorized cause rules, not a PIP.

7.1 Authorized cause due process (high level)

Authorized causes generally require:

Written notice to the employee and DOLE at least 30 days before effectivity, and
Separation pay at statutory rates (varies by cause).

A PIP cannot be used to disguise redundancy/retrenchment. Misclassification can lead to illegal dismissal findings.

8) Probationary employees: Special rules where PIPs often appear

8.1 Termination for failure to meet standards

Probationary employment (commonly Art. 296 [formerly Art. 281]) allows termination if the employee fails to meet reasonable standards made known at the time of engagement.

Key principles:

Standards must be communicated at hiring (or at least very early, consistently recognized in jurisprudence).
Termination must be based on failure to meet those known standards, not vague dissatisfaction.

8.2 Is a PIP required for probationary termination?

Not strictly as a statutory requirement, but a PIP can be helpful evidence that:

standards were clarified,
the employee was coached,
evaluation was fair.

Even for probationary termination, written notice and a fair process are still important, and employers commonly provide documented notices and a chance to respond to avoid claims of arbitrariness.

9) Fixed-term, project-based, and casual arrangements: where PIP fits (and doesn’t)

Fixed-term/project employment usually ends by completion/expiration. A PIP is not necessary for natural expiration.
If an employer ends the contract before completion/expiration for performance reasons, it can become a termination dispute, and due process/valid cause analysis may apply depending on the classification and facts.
Misclassification of employees (e.g., labeling regular roles as “project”) can also complicate performance exits.

10) Constructive dismissal risks: When a PIP becomes unlawful pressure

A PIP can support termination, but it can also be used as evidence of constructive dismissal if the employer’s actions effectively force the employee to resign or make continued employment unbearable.

Red flags:

impossible metrics or abrupt, unexplained metric inflation,
demotion in rank or pay “as part of PIP,”
humiliating treatment, public shaming, threats,
removal of essential tools/support while demanding improvement,
selective enforcement (only certain employees placed on PIP without objective basis),
PIP used after protected activity (complaint, union activity) suggesting retaliation.

If the employee resigns under pressure and later claims constructive dismissal, the employer must prove the resignation was voluntary.

11) Documentation: What employers typically need to prove performance-based dismissal

In labor cases, the employer bears the burden of proof and must support its claims with substantial evidence (more than a mere scintilla; relevant evidence a reasonable mind might accept).

Strong documentation usually includes:

job description and competency framework,
written KPIs/scorecards and how they are computed,
historical performance ratings (not just the last month),
emails/memos coaching the employee,
PIP document with baseline metrics, targets, supports, and review dates,
weekly/monthly check-in notes,
training records, QA calibrations, audit results,
system logs (where relevant) with context (downtime, reassignment),
the Notice to Explain, employee explanation, minutes of conference/hearing,
Notice of Decision with reasons.

Tip: If an employee refuses to sign the PIP, document the refusal and service (e.g., witness notation, email with receipt, HR acknowledgment). Signature is helpful but not the only way to prove notice.

12) Designing a legally defensible PIP (Philippine context)

A PIP is most defensible when it is clearly a good-faith performance intervention rather than a pretext.

12.1 Essential components

Performance gaps
- specific instances, metrics, and dates
Expected standard
- KPI targets, quality thresholds, behavioral expectations
Baseline and measurement method
- how metrics are computed, audit rules, sampling, exclusions
Timeframe and milestones
- 30/60/90 days + weekly check-ins
Support plan
- training, buddy system, coaching schedule, tools, workload adjustments
Consequences
- what happens if improvements are not achieved (careful wording: do not “auto-terminate”; instead note it may lead to further administrative action up to termination subject to due process)
Acknowledgment and feedback mechanism
- employee comments section; grievance/escalation route

12.2 Best practices that reduce legal risk

Keep targets reasonable and consistent with similarly situated employees.
Avoid “moving goalposts.” If business needs change targets, document why and apply uniformly.
Ensure metrics are within the employee’s control, or adjust for uncontrollable variables.
Use calibrated QA/audit processes; avoid cherry-picked samples.
Provide actual support, not just instructions to “do better.”
Separate performance issues from misconduct issues; handle each under the proper policy.

13) Dismissal after a failed PIP: The correct legal approach

A common mistake is treating the end of a PIP as an automatic termination trigger. The safer model is:

PIP concludes with documented results (pass/fail with data).
If failure is significant and repeated, employer proceeds with just cause due process:
- issue Notice to Explain citing the failure and the underlying factual basis,
- allow time to explain,
- hold conference/hearing,
- issue decision notice.

This sequencing helps show:

the dismissal is not arbitrary,
the employer considered the employee’s side,
the employer relied on documented facts.

14) Remedies and employer liability when rules are violated

14.1 If dismissal is illegal (no valid cause and/or serious due process failure)

Possible consequences can include:

reinstatement (or separation pay in lieu in some situations),
full backwages from dismissal until reinstatement/finality,
payment of benefits and differentials due,
potentially damages and attorney’s fees (depending on findings).

14.2 If there is valid cause but procedural due process is defective

Philippine jurisprudence recognizes scenarios where:

dismissal may be upheld for a valid cause, but
employer is ordered to pay nominal damages for failure to comply with procedural due process requirements.

Well-known guideposts include:

Agabon doctrine (just cause but defective procedure → nominal damages),
Jaka doctrine (authorized cause but defective notice → nominal damages), with amounts varying by case circumstances (often discussed in the tens of thousands of pesos in many decisions).

15) Final pay, separation pay, and benefits in performance-based terminations

15.1 Separation pay

Generally not required for just cause termination (which is the usual category for performance-based dismissal), unless:
- company policy, CBA, or contract grants it, or
- a settlement/compromise is reached.

15.2 Final pay and statutory benefits

Even if terminated for just cause, employees are typically entitled to lawful earned amounts, such as:

unpaid wages up to last day worked,
pro-rated 13th month pay (under PD 851),
conversion of unused service incentive leave if company practice/policy allows conversion,
other accrued benefits per policy/contract.

Employers should be careful with withholding final pay; disputes should be handled according to lawful company policies and applicable DOLE guidance/practice.

16) Unionized workplaces and CBAs: extra process layers

Where a Collective Bargaining Agreement (CBA) exists, it may impose:

progressive discipline steps,
grievance machinery requirements,
notice/service rules,
special hearing procedures.

Failure to follow CBA-mandated procedure can create additional risk even if Labor Code due process is followed.

17) Data privacy and confidentiality in PIPs

PIPs contain performance data that may qualify as personal information. Sound practice includes:

limiting access to those with a legitimate role,
securing storage and transmission (especially email/shared drives),
retaining records only as necessary for legitimate business and legal purposes,
ensuring employees understand what data is collected and how it is used (often via privacy notices/policies).

18) Practical checklists

18.1 Employee-side checklist (to assess fairness)

Were standards and KPIs clear and communicated early?
Are targets reasonable and comparable with peers?
Were you given tools/training and time to improve?
Were metrics computed correctly (with context like downtime/assignment changes)?
Did the employer follow notice and hearing requirements before termination?

18.2 Employer-side checklist (to reduce illegal dismissal risk)

Do you have clear written standards tied to the role?
Are performance ratings consistent and evidence-based?
Is the PIP specific, supported, time-bound, and documented?
Are you avoiding constructive dismissal indicators?
Before termination: did you complete the two notices and genuine opportunity to be heard?
Is the ground properly classified (just vs authorized cause)?

19) Bottom line

In the Philippines, a PIP is best understood as a management tool that supports fairness and evidence, not as a legal shortcut to dismissal. Performance-based termination is most defensible when the employer proves (1) clear reasonable standards, (2) fair measurement, (3) genuine opportunity to improve, (4) continued significant underperformance, and (5) compliance with the two-notice rule and opportunity to be heard before termination takes effect.