Performance Improvement Plans in Singapore: What Employers Can Learn from the SAP Case

A performance improvement plan should give an employee a genuine opportunity to improve. When management has already decided that the employee must leave, presenting a PIP as an open improvement process can create legal and reputational risks.

The High Court’s decision in Prashant Mudgal v SAP Asia Pte Ltd [2026] SGHC 15 offers useful lessons for Singapore employers about performance management, documentation and fair treatment.

The judgment, delivered on 21 January 2026, examined a 45-day PIP imposed in March 2019. Internal correspondence showed that management had already aligned on removing the employee from his role before the plan began. His employment was subsequently terminated.

The practical lesson is that employers should design and assess performance improvement plans honestly, with measurable expectations, appropriate support and an outcome that remains genuinely open.

1. What the High Court Decided

In this judgment, the High Court recognised an implied term of mutual trust and confidence and found that SAP had breached it in its treatment of the employee.

The court’s reasoning concerned the employer’s conduct during the employment relationship, including the way it handled the PIP.

The legal position requires qualification. The judgment followed an earlier High Court decision recognising the implied term, while acknowledging differing judicial views and that the Court of Appeal had not settled the question. Employers should therefore understand this as the finding in this High Court judgment, rather than an unqualified rule automatically applying to every employment contract.

2. What the Court Did Not Decide

The court did not find the termination itself wrongful. It also dismissed the conspiracy claims and declined to recognise a separate implied term preventing arbitrary exercise of the contractual termination right.

However, employers should distinguish contractual termination rights from statutory obligations. Giving contractual notice or paying salary in lieu does not, by itself, resolve every potential wrongful dismissal issue.

The decision also does not mean that every PIP ending in dismissal amounts to a breach. A genuine improvement process can result in dismissal when the employee does not meet reasonable, properly assessed expectations.

3. The Damages Outcome

Paragraph 61 of the judgment records that the employee sought S$4,961,767.05 in damages. Paragraph 246 explains his claimed earnings calculation.

The court awarded S$1,000 in nominal damages, having found a breach but no proven recoverable loss flowing from it.

For employers, compensation is only one consideration. Litigation can also consume management time, incur legal costs and expose internal correspondence to public scrutiny. A published judgment may remain accessible to employees, candidates and business partners.

4. What Makes a Performance Improvement Plan Genuine?

A PIP should be practical, fair and capable of successful completion.

What the Tripartite Guidelines Recommend

The Tripartite Guidelines on Fair Employment Practices recommend fair and objective appraisal systems, measurable performance standards and regular, constructive reviews.

Performance reviews should be documented and retained for at least one year. Employers should also provide an internal appeal process to address employees’ concerns about their appraisals.

For dismissals, the guidelines recommend that decisions be based on documented poor performance or misconduct and that employees be allowed to present their case through an inquiry before a dismissal decision is made.

Poor Performance and Misconduct Require Different Approaches

Managing underperformance and investigating misconduct serve different purposes.

A PIP ordinarily aims to help an employee meet the requirements of the role. It should explain the performance gaps, the improvement expected and the support available.

For misconduct, MOM states that employers must conduct a formal inquiry before taking disciplinary action. Employees should be informed of the alleged wrongdoing and given an opportunity to respond, and the person hearing the inquiry should not appear biased.

Employers should therefore distinguish between:

• The formal inquiry required for disciplinary action involving misconduct; and
• A fair performance management process that allows the employee to respond before a dismissal decision, consistent with TAFEP’s recommendations.

A PIP should not be used to disguise a decision already made. Any decision to end employment should be assessed against the contract, applicable legislation and the relevant circumstances.

Clear role requirements also help prevent performance problems from arising. SSS’s executive search and specialist recruitment services for employers support role definition, selection criteria and candidate assessment.

5. The Talent and Reputation Implications

How an organisation handles underperformance can affect more than the employee concerned.

Employee trust: Colleagues may lose confidence in management if they perceive an improvement process as predetermined.

Retention: Employees who question the fairness of internal processes may become more receptive to opportunities elsewhere.

Employer reputation: Candidates may consider former employees’ experiences, professional networks and publicly available information when assessing an employer.

Replacement recruitment: Hiring a successor may become more difficult when candidates have concerns about the role, management expectations or team environment.

Public scrutiny: Published judgments can make management decisions and internal correspondence accessible beyond the organisation.

These are practical considerations rather than outcomes that necessarily arise in every case.

6. What Employers Should Review

Clarify the purpose of the PIP. Confirm that the organisation genuinely seeks improvement and that successful completion remains possible.

Distinguish underperformance from misconduct. Ensure managers understand which process applies and when an inquiry is required.

Review PIP templates. Check that objectives are measurable, timelines are reasonable and support is clearly specified.

Train managers to keep accurate records. Emails, messages, meeting notes and appraisal records should be factual, professional and consistent with the process being followed.

Document feedback promptly. Record progress, support provided, concerns raised and the employee’s responses during the plan.

Check appeal and grievance arrangements. Make sure employees know how to raise concerns about their appraisal or treatment.

Plan workforce needs without prejudging an ongoing PIP. General succession and contingency planning may continue, but it must not turn the employee’s departure into a predetermined outcome. Decisions about replacing the employee should follow a properly reached employment decision.

How Strategic Search Specialist Supports Employers

Effective workforce management begins with hiring people whose skills and experience match clear role requirements.

At Strategic Search Specialist (S) Pte Ltd (SSS), we support employers through:

• Executive search and specialist recruitment: Identifying and assessing executives, managers and specialist professionals.
• Role definition and recruitment planning: Clarifying responsibilities, essential competencies and selection criteria.
• Replacement and succession recruitment: Supporting recruitment for critical, newly vacant or future roles.
• Fair recruitment practices: Helping employers prepare appropriate job advertisements and assess candidates against genuine job requirements.

For separate advisory support with performance management, HR documentation and employment compliance, employers may contact our associated consultancy, Human Capital Consulting & Services (Spore) Pte Ltd (HCCS), at hccs.sg.

Frequently Asked Questions

Q1. Does this decision mean Singapore employers can no longer dismiss employees?

No. The judgment distinguished the employer’s contractual termination right from its conduct during the employment relationship. Employers must also consider applicable legislation and protections against wrongful dismissal.

Q2. What is the implied term of mutual trust and confidence?

In this judgment, the High Court recognised an implied contractual obligation concerning conduct that seriously undermines the employment relationship without reasonable and proper cause. The Court of Appeal has not settled the broader legal question, so the finding should be attributed to this judgment.

Q3. Does every PIP that ends in dismissal amount to a breach?

No. A genuine PIP may end in dismissal if the employee does not meet reasonable expectations. Employers should assess the outcome fairly, using the communicated objectives and relevant evidence.

Q4. Is a formal inquiry required before dismissing an employee for poor performance?

MOM requires a formal inquiry before disciplinary action for misconduct.

Poor performance is a different matter. Nevertheless, the Tripartite Guidelines on Fair Employment Practices recommend an inquiry allowing the employee to present their case before a dismissal decision, supported by documented poor performance or misconduct.

Employers managing underperformance should follow a fair, documented process and give the employee an opportunity to respond before deciding.

Q5. How much was the employee awarded?

The court awarded S$1,000 in nominal damages. Paragraph 61 records the S$4,961,767.05 claim, and paragraph 246 explains the claimed earnings calculation.

Q6. What performance records should employers keep?

Keep the appraisal or PIP objectives, relevant performance evidence, feedback, support provided, meeting notes, employee responses and final assessment.

The Tripartite Guidelines recommend retaining documented performance reviews for at least one year. Longer retention may be appropriate where a dispute or another applicable obligation requires it.

Q7. Are these lessons relevant to small employers?

Yes. Clear expectations, fair reviews, documented feedback and an opportunity to respond are relevant to employers of all sizes. The Tripartite Guidelines are not confined to large organisations.

The implied-term finding discussed in this article should still be understood in the context of this High Court judgment and the unresolved appellate position.

Looking for the Right Talent?

Whether you are expanding your workforce, filling a vacancy or strengthening your management team, SSS welcomes the opportunity to discuss your recruitment needs.

Employers can advertise vacancies on the SSS website at no posting charge. Professional recruitment and placement services are quoted separately.

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Strategic Search Specialist (S) Pte Ltd

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Ker Bee Bee, Founder & CEO

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WhatsApp: +65 9436 2866

References

1. Prashant Mudgal v SAP Asia Pte Ltd [2026] SGHC 15 — official judgment. See paragraphs 61 and 246 for the claimed amount and calculation, and paragraphs 287–288 for the nominal damages award.
2. TAFEP — Tripartite Guidelines on Fair Employment Practices.
3. Tripartite Guidelines on Fair Employment Practices — full PDF. See printed pages 13–14 for performance appraisals, disciplinary actions and dismissals.
4. MOM — Termination due to employee misconduct.

Information reviewed as at 11 October 2026. This article provides general information and does not constitute legal advice.