Termination during a probationary period: can it be done?

Deciding to let a new employee go when it's not working out can be difficult, posing risks for the business, the employee, and yourself.
Termination during a probationary period: can it be done?

Employers are often just as excited as new hires at the prospect of starting something new, but even with all the best intentions, it’s never great when your new employee just isn’t working out. Deciding you have to let them go for the good of the business – or even their own good – can be a tricky situation. You want to do the right thing for the business, the employee, and you but what are the risks?

In this article we look at termination during the probation period, what the risks are, what are the employee’s rights, and everything in between.

What is a probationary period?

Did you know that when a business first employs 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, as an employer, to assess whether the employee is the right person for the job and your business. It’s also an opportunity for the employee to decide whether the position is the right fit for them. A probationary period makes it possible for both parties to depart the 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 (NES).

The main protection employers get from termination during the probationary period is that 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 employment period employment’. Under the Fair Work Act 2009 (Cth) (FWA), the minimum employment period is six months of continuous service. This means the usual maximum probationary period you can have for an employee is six months.

The only exception to this is for small businesses that employ fewer than 15 employees where the minimum employment period – and the maximum probationary period – is 12 months. This extended period gives small business owners more time to decide whether an employee is a good fit for their business.

As an employer, you have the right to decide how long you wish to keep the new employee on probation. If this probation period is within the periods specified in the FWA, the business will face less risk in the event of termination. You must tell your new employee how long they’ll be on probation, and include this information in their employment contract.

What does this mean in practical terms?

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 (if this is within the minimum employment period) without leaving yourself open to an unfair dismissal claim. Nevertheless, there are other considerations employers must be aware of before deciding to terminate the services of such an employee (including whether there is any risk of a general protections claim as any employee, including an employee still within their minimum employment period, is eligible to make).

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 employment period 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 employment period. 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 towards an employee’s continuous service. On the other hand, periods of paid leave) aren’t considered excluded periods and will count towards the length of an employee’s service.

Taking care when you calculate the minimum employment period is crucial as it directly relates to whether an employee will have access to make an unfair dismissal claim in the event of a termination.

A probationary employee still has certain rights

The existence of minimum employment periods doesn’t give you a completely unrestricted 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 isn’t required to have completed any minimum period of employment to lodge a claim under the general protection provisions of the FWA. In short, if they’re on probation an employee is still protected from unlawful action being taken concerning 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. Handling things sensitively, and professionally, and complying with the law will greatly reduce your risk of an unfair dismissal or general protections claim.

If you have any questions about termination during a probationary period or any other workplace matters, please contact our HR Advice Line.

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