Key tips and best practices for businesses when managing employee probationary periods

Managing employee probationary periods effectively is critical to ensuring that new hires are a good fit for your business, both in terms of capability and cultural alignment. While probation is not legally required, it offers employers a valuable window in which to assess performance and suitability before confirming ongoing employment. This article outlines key tips and best practices for businesses when setting, managing and concluding probationary periods to ensure compliance with employment laws and minimise legal risks.

A probationary period is the initial period of an employee’s employment. It is only relevant to permanent (full-time and part-time) employees. Casual employees should not be subject to a probationary period.

It is not mandatory for new employees to have a probationary period. However, probationary periods afford businesses an opportunity to evaluate whether a new hire is the right person for the role and whether they have the necessary skills and experience. During a probationary period the employer can bring the employee’s employment to an end with minimal notice (or for minimal cost).

Typically, a probationary period will be for 3 or 6 months. In determining the length of a new employee’s probation, regard should be given to the minimum notice period for termination prescribed in the Fair Work Act 2009 (Cth) (Fair Work Act) and any relevant award or enterprise agreement.

It is also relevant to consider the employee’s applicable qualifying period of employment under the Fair Work Act for unfair dismissal purposes (which will be 6 or 12 months, depending on the size of the employer’s business). Once an employee has completed 6 months service (or 12 months service if the employer is a “small business employer”), subject to them satisfying certain eligibility criteria, they will be able to bring an unfair dismissal claim, regardless of whether they have passed their probationary period or not.

It may be desirable to extend an employee’s probation, for example, because the employee was absent for part of their probationary period, or because the employer wants further time to assess the employee’s performance and suitability for their role.

An employer cannot unilaterally decide to extend an employee's probationary period. An employee’s probationary period can only be extended if the employee agrees or if this is permitted by the terms of the employee’s contract of employment. The length of an employee’s probation should therefore be carefully considered before the employee’s employment commences.

No – other than in instances of serious misconduct, employees must be given notice in accordance with the Fair Work Act and any relevant award or enterprise agreement. Typically, one week’s notice will be required. Alternatively, employees must be paid in lieu of notice.

Provided that an employee’s employment ends before they complete the qualifying period of employment (6 or 12 months), the employer will not be at risk of having to defend an unfair dismissal claim.

However, other kinds of legal claims can be brought by an employee regardless of their length of service, including general protection claims under the Fair Work Act and claims under anti-discrimination legislation.

For that reason it is critical that businesses:

• are proactive in managing employees during probation and not wait until the end of the probationary period to assess an employee’s performance; and
• keep a record of performance discussions, goals and feedback to support the reason(s) for any decision to terminate during a probationary period.

On termination, employees are entitled to be paid out any accrued untaken annual leave. Any additional entitlements provided for in the employee’s employment contract will also need to be paid out.

A well-managed probationary period lays the groundwork for long-term employment success or, where necessary, a low-risk separation. By clearly setting expectations, documenting performance and understanding your legal obligations, you can make informed decisions that protect your business. Proactivity is the cornerstone of effective probationary period management.

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.