Terminating an employee when they’re on probation

It’s never great when your new employee just isn’t working out. You decide you have to let them go for the good of the business (or even their own good). They’re still on probation and you want to do the right thing for the business, yourself and the employee. But what are the risks?

Let’s start with the basics…

What is a probationary period?

When you first employ someone, you’re entitled to put that person on ‘probation’ for a certain amount of time.

The idea behind a probationary period is to give you time to assess whether the employee is the right person for the job and your business. It also lets the employee decide whether the position is right for them. A probationary period makes it possible for you both to part company fairly easily, if things don’t work out in the early stages, usually by allowing you to reduce the amount of notice both you and the employee are required to give – though this can’t be reduced to less than the minimum notice required under the National Employment Standards.

The main protection you get is that if you terminate their employment during the probationary period, a new employee can’t make an application for unfair dismissal.

How long is a probationary period?

The proper legal name for a probationary period is ‘minimum period of employment’. Under the Fair Work Act 2009 (Cth) (FWA), the ‘minimum period of employment’ is six months of continuous service. This means the usual maximum probationary period you can have for an employee is six months.

The exception is if you’re a ‘small business employer’ (defined as being someone who employs fewer than fifteen employees). In this case, the minimum employment period (and thus maximum probationary period) is twelve months, giving small business owners more time to decide if an employee is a good fit for their business.

Within the time periods specified in the legislation, you can decide the length of the probation period at the start of employment. It can range from a few weeks, to a few months, to the full six or twelve months. As an employer, you have the right to decide how long you wish to keep the new employee on probation. As long as this probation period is within the time periods specified in the FWA, the business will face less risk in the event of termination. It’s important that you tell your new employee how long they’ll be on probation, and also include this information in their employment contract.

What does this mean in practical terms?

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 such an employee.

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’ve properly calculated the period of employment.

It’s probably stating the obvious, but the ‘minimum period of employment’ starts on the date employment commences. It finishes, however, 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.

If you decide to pay the applicable notice period instead of giving the employee formal notice, the employee’s period of employment will usually cease immediately.

Be aware that certain ‘excluded periods’ don’t 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 or 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.

So take care when you calculate the minimum employment period, particularly where you pay notice in lieu or rely on an ‘excluded period’ to bring the individual within the minimum employment period.

A probationary employee still has certain rights

The existence of minimum employment periods doesn’t give you a completely unfettered right to terminate an employee during their probation. There are a range of claims, other than unfair dismissal, which a former employee may be able to make 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, if they’re on probation an employee is still 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 or not your employee has completed the minimum employment period shouldn’t be your only consideration in deciding whether termination is appropriate. As an employer, you need to be aware that the decision to terminate an employee may expose the organisation to significant risk, irrespective of the minimum employment period. You’ll greatly reduce this risk, however, if you handle things sensitively, professionally, and comply with the law.

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? We offer a complete people management solution where, as part of the package, you get access to expert advice, 24/7, from our team of qualified and experienced workplace relations consultants.