Employers may opt to include an initial period at the start of a permanent employee’s employment during which time the employer takes the opportunity to assess whether their new employee is capable, reliable and suitable for the job. This called a probationary period or just probation, and if the employee is not suited to the role, there are less obstacles to terminating the employee during this period.
Can You Terminate An Employee During Their Probation Period?
‘Probation’ is not a term used by the Fair Work Act 2009 (the Act). The Act refers to a Minimum Employment Period which is determined by the amount of time the employee has worked in the business and the size of the business. The minimum employment period is the minimum period that an employee must be engaged in the business before they may have access to an unfair dismissal claim if you terminate their employment.
For a small business with less than 15 employees this is 12 months, otherwise it is six months. During the minimum engagement period an employee may be terminated subject to written notice in accordance with the relevant provisions of the NES, the applicable industrial instrument or their employment contract.
Many consider it is best practice for an employer to have a policy in respect of managing and possibly terminating employees during their probationary period. The first step, before the employee even starts work, is drafting an employment contract that clearly states the length of the probationary period including the start and the end dates, and specified in what circumstances the probation may be extended and how long for.
In the first week of employment, it is considered best practice to tell the employee what you expect of them in terms of skills, tasks, deadlines, and conduct.
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Dismissing An Employee During Their Probation Period
Before the probationary period ends, you should meet with the employee and let them know whether they have passed probation. If they are unsuccessful, you can extend their probationary period if the contract, award or registered agreement allow for it or end their employment.
If you are ending their employment, it may be considered best practice to meet with the employee to provide feedback about their performance or conduct and explain why the probation period was unsuccessful.
Under the National Employment Standards set out in the Fair Work Act 2009, you need to give an employee written notice to end his or her employment. The written notice should specify the period of notice given (or payment in lieu of notice), and the date the employment will end. If they are outside the minimum engagement period, an additional process will be required. Call the Fair Work Helpline for Employers by Employsure for free initial advice on terminating an employee outside of the minimum engagement period on 1300 651 415.
Always confirm the outcome of the meeting in writing to the employee whether they are successful or unsuccessful, and whether you are extending the probation or are terminating their employment, and keep a copy as well as a written record of the discussion during the meeting.
Valid Reasons For Termination
If you choose to terminate an employee during probation it is best to, always provide a reason that can be supported with evidence if required.
If the probation period has gone beyond the minimum employment period, the Fair Work Commission has determined that you should not dismiss any employee without a valid, sound, and defensible reason given the circumstances, and a fair dismissal process, in order to minimise the risks of a subsequent unfair dismissal claim. Valid reasons are varied and fall under four key areas:
Capacity – if the employee lacks the ability, or is incapable, of completing the inherent requirements of their role;
Performance – if the employee’s skill level or quality of work is below what is required for the job, or if they are not meeting the standards outlined in their employment contract due to a lack of care or diligence;
Misconduct – when an employee partakes in behaviour that is out of line with company policy, goes against the terms of an employment agreement, or is unlawful; or
Redundancy – when an employer either decides they no longer need an employee’s job to be done by anyone, or the employer becomes insolvent or bankrupt.
Other reasons for dismissal may be valid if the employee does not have access to an unfair dismissal claim, provided those reasons don’t give rise to a general protections claim. The Fair Work Act 2009 provides protection from dismissal for employees in various circumstances, including in relation to workplace rights, industrial action and discrimination, amongst others.
Notice And Warning
Employees who are on probation have the same entitlements as a permanent full-time or part-time employee including wage entitlements, sick leave, annual leave, and notice. So once you have decided that you do not wish to continue their employment you should meet with the employee to inform them of the reasons that their probation is unsuccessful. You are required to give the employee sufficient written notification of the day their employment will end. The notice period varies, depending on how long an employee has worked within the business, and the applicable industrial instrument or employment contract.
The employee can either work during the notice period or alternatively the employer must make payment of the notice in lieu, which is to be included in the employee’s final pay along with any other entitlements owing, which may include, but is not limited to, outstanding wages and unused (annual) leave entitlements.
Notice is paid at the employee’s full pay rate as if they had worked the minimum notice period, so payment in lieu of notice can include incentive-based payments and bonuses, loadings, allowances and overtime or penalty rates.
General Protection And Discrimination Risks When Dismissing An Employee
The Act provides that an employee on probation can only bring an unfair dismissal claim after employment for a minimum of six months or 12 months for a small business employer with less than 15 employees at the time of the dismissal.
In most cases, probation periods rarely go beyond six months. However, as an employer, it’s essential to keep the minimum employment period in mind when you decide to extend a probationary employee’s period of employment. If you extend the period of employment beyond the minimum employment period of six months or 12 months for a small business employer, and then terminate an employee, the employee may bring an unfair dismissal claim. This is different to a general protections claim.
An employee may be able to initiate a general protections claim regardless of the length of their employment if the dismissal is for a prohibited reason, so due to discrimination based on race, age, gender and other such attributes, or because the employee exercised a workplace right, for example.
Prohibited reasons include dismissal due to discrimination based on:
Sex and sexual orientation
Employers cannot terminate employees for protected reasons whilst they are on probation, for example because they filed a work complaint, acted as whistleblowers, or made an enquiry as to their pay.
As this is a complex area, it may be prudent to call us for free initial advice if you are considering terminating an employee during their probation period.
Call the FairWork Helpline for Employers by Employsure for free initial advice on 1300 651 415.
Alternatively, explore our BrightHR and BrightSafe software to help you manage your business and your new employees, for example to store documents and keep track of performance issues and employee entitlements.
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Frequently Asked Questions
What Is A Probation Period?
A probationary period is period of time at the start of a permanent full-time or part-time employment relationship that gives the employer the opportunity to assess whether their new employee is capable, reliable and suitable for the job. If the employee is not suited to the role, there are generally less obstacles to terminating the employee.
Can A Probation Period Be Extended?
Yes, but you can only extend the probationary period by whatever set amount of time is stated in the contract. Bear in mind that if you extend the probation period beyond the minimum employment period and then dismiss the employee, they may have access to unfair dismissal if the probation period extends beyond the minimum employment period of either six or 12 months, depending on the size of your business.
How Long Is An Employee’s Probationary Period?
Generally, the employer decides the length of the probationary period in the employment agreement, but an award or registered agreement may provide otherwise. If the probation period is extended beyond the minimum employment period of either six or 12 months (depending on the size of your business), the employee may have access to an unfair dismissal claim if you subsequently terminate their employment.
Can An Employee On Probation Bring An Unfair Dismissal Claim?
Yes, if If the probation period is extended beyond the minimum employment period of either six or 12 months (depending on the size of your business), the employee may have access to an unfair dismissal claim if you terminate their employment after the applicable minimum employment period.
Does An Employer Have To Give A Reason When Terminating Employment During The Probationary Period?
Yes, an employer should give a reason to the employee for terminating their employment. If the probation period has extended beyond the minimum employment period, then the employer needs to give a ‘valid’ reason and carry out a fair process to reduce the risk of an unfair dismissal claim.
Valid reasons are reasons that fall into the below categories:
- Capacity – if the employee lacks the ability, or is incapable, of completing the the inherent requirements of their role;
- Performance – if the employee’s skill level or quality of work is below what is required for the job, or if they are not meeting the standards outlined in their employment contract due to a lack of care or diligence;
- Misconduct– when an employee partakes in behaviour that is out of line with company policy, goes against the terms of an employment agreement, or is unlawful; or
- Redundancy– when an employer either decides they no longer need an employee’s job to be done by anyone, or the employer becomes insolvent or bankrupt.
If you are considering terminating an employee who has been employed beyond the applicable minimum employment period, please call us for free initial advice on 1300 651 415.
What Are Employees Entitled To When You Terminate Their Contract During Probation?
An employee on probation has the same entitlements as a permanent full-time or part-time employee but may not have access to unfair dismissal if terminated, depending on their length of service and the minimum engagement period that applies to the business.
This means that the employer has to provide notice to the employee and notify them in writing as to when their employment will end. The length of the notice period will depend on the terms of their employment agreement or the relevant award or registered agreement. The employee can either work the notice period or be paid in lieu. The employer should also pay out any wages owing, and any unused annual leave, as well as notice (if applicable) as part of the employee’s final pay.