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Employee termination without risk: Probationary periods

October 20, 2015

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What is a probationary period?

When a new employee starts work, as an employer, you are entitled to put that person on ‘probation’. Once that person has begun their probation period the risks involved with employee termination significantly decrease. The idea is that a probationary period gives you time to assess whether the employee is the right person for the job and your business. In addition, it allows the employee to work out whether the position is right for them. The idea behind the probationary period is that it makes it possible for you to part company with the employee relatively easily if things don’t work out in the early stages.

Most importantly, during this period, the new employee cannot make an application for unfair dismissal.

How long is the probationary period?

The minimum period of employment (commonly referred to as the ‘probationary period’) is defined under the Fair Work Act 2009 (Cth) (FWA) as being six months of continuous service. If, however, the employer is a ‘small business employer’, the minimum employment period is twelve months. A ‘small business employer’ is defined as being someone who employs fewer than fifteen employees.

Within the time periods specified in the legislation, the employer can decide the length of the probation period. It can range from a few weeks to a few months at the start of employment. As an employer, you have the right to decide how long you wish to keep the new employee on probation within the time periods specified in the FWA.

What does this mean in practical terms for your business?

In order to be eligible to make an unfair dismissal claim, an employee must have first completed the minimum period of employment with his or her employer. Generally, this means that you can terminate the employee during the probationary period without leaving yourself open to an unfair dismissal claim.

Nevertheless, there are some potential pitfalls you need to be aware of before you make the decision to terminate the services of an employee who is on probation.

Make sure you calculate the minimum period of employment correctly

Before you terminate the services of an employee on probation, you need to make sure you have calculated the period of employment correctly.

The period of employment starts on the date employment commences. It finishes on either the date the employee is notified of the dismissal or immediately before the dismissal, whichever is earlier.

A ‘month’ means a calendar month, beginning on a date and finishing immediately before the corresponding date in the next month.

Where an employer opts to pay the applicable notice period instead of giving the employee formal notice, the employee’s period of employment will usually cease immediately.

It is important to be aware that certain ‘excluded periods’ do not count towards the minimum period of employment. These typically relate to periods of authorised absence, certain types of unpaid leave and certain types of unpaid authorised absence. For example, periods of unpaid parental leave and unpaid personal/ carer’s leave will not count. On the other hand, periods of community service leave (such as jury service and certain ‘stand downs’) are not considered excluded periods and will count towards the length of an employee’s service.

A probationary employee still has certain rights

It is important to be aware that the minimum employment period does not grant an unfettered right to terminate an employee during that period. There are a range of claims, other than unfair dismissal, which a former employee may be able to access irrespective of their length of service.

For example, an employee is not required to have completed any minimum period of employment in order to lodge a claim under the general protection provisions under the FWA. In short, an employee is protected from unlawful action being taken in relation to the exercise of workplace rights, engaging in industrial activities and discrimination in the workplace.

What does this mean for your business?

Whether the employee has completed the minimum employment period should not be your only consideration in determining whether termination is appropriate. As an employer, you need be aware that the decision to terminate an employee may expose the organisation to significant risk, irrespective of the minimum employment period.

You also need to take care when you calculate the minimum employment period; particularly where notice is paid in lieu or an ‘excluded period’ is relied upon to bring the individual within the minimum employment period.

Do you need more information regarding the minimum period of employment in your business? Are you thinking of terminating the services of an employee on probation? HR Assured offers a complete people management solution where, as part of the package, you can get advice from our experienced workplace relations consultants whenever you need it. Would you like to find out more? Call us on 1300 345 875.