Probation in 2022: Should you terminate employment?

Many employers see probation periods as something of an insurance policy when it comes to recruiting staff. If things don’t work out in the first six months, they potentially give you the option of ending the employment relationship without incurring significant costs or facing lengthy legal action. 

But with labour shortages, wage rises and mass resignations a feature of the employment landscape in 2022, do employers need to be a little more circumspect when it comes to terminating a probationary employee’s employment? We explore everything you need to know about probation periods in 2022.

The case against terminating employment

Let’s begin by looking at when terminating isn’t the best path. 

Hiring and firing employees is an expensive business. In 2019, I wrote about how to terminate employment when someone is on probation. Back then I noted that one US study found that the cost of losing a staff member and re-hiring generally equates to around a third of their income. In other words, if you need to fire and re-hire someone on $60,000 a year, expect it to set your business back $20,000. 

That study was made in a very different labour market than the current one too. Today, the costs are likely to be much higher, given just how difficult it is to find good employees.

That means terminating someone’s employment – even when they’re on probation – isn’t something you’d do lightly. 

But, still, there are times you really should dismiss an employee, especially where the cost of their continuing underperformance will be much bigger in the long run. 

How do probationary periods work? 

Even when you’ve done all the right things in the recruitment process, you’ll sometimes make mistakes. After all, you can’t be 100% certain about anyone’s work – or how they fit into your organisation – until you actually see it for yourself. Probationary periods are designed to get around this, letting you use an employee’s early time with you – usually between three and six months – to assess whether they’re right. 

If they’re not, well, you have the opportunity to end the employment relationship without the same legal obligations you’d have towards a more long-standing employee. 

That said, an employee still has some entitlements during probation. For instance, they’re still entitled to the 10 National Employment Standards and some of the protections contained in the Fair Work Act 2009. 

This means you’ll have to provide them with a week’s notice of termination (or at least payment in lieu of this notice period). They’ll also be entitled to be paid for any annual leave they’ve accrued. 

What they usually won’t be entitled to do, is to bring an unfair dismissal claim in the Fair Work Commission.  However, under the Fair Work Act 2009, employees can’t bring an unfair dismissal for the first six months of their employment anyway – or 12 months where the employer has less than 15 employees.

The key: An effective probation period

The key to getting probation right – especially in today’s environment – is to run an effective probation period. This means not just giving your employee the opportunity to prove themselves but also helping equip them with the skills they need to be a good employee. 

Here’s how I think you should do that in 2022.

• Schedule regular meetings. All employees need guidance but that’s especially true of new employees. And it’s even more true when many of us are working more flexibly than in the past. Whenever someone is on probation, I recommend meeting with them weekly – or at least fortnightly – to discuss performance, highlight your expectations and answer any questions they may have. If you’re working remotely, I think this needs to be even more regular still. A daily Zoom chat – or at least a chat every other day – can go a long way to making sure everyone’s on the same page and your employee is meeting expectations.  
• Raise issues when they occur. You don’t necessarily wait until you’ve arranged a meeting to raise issues. You should be giving feedback on every item of work that your new employee engages in so that they know your expectations right from the start.
• Be specific. If you do have an issue, be specific with what it is and what they need to do to improve. Set goals and milestones for them where you think this will help. 
• Be honest. Everyone likes to be liked, even (or especially) bosses. But in my experience sweeping things under the carpet instead of confronting them, head-on almost always leads to worse outcomes.
• Warn them. Where someone does need to improve, let them know what will happen if they don’t lift their game and meet your expectations. 
• Be fair. At the same time, don’t go overboard with criticism. Nobody’s perfect and your new employee needs to feel free to make minor mistakes as they learn.
• Give them time. Now more than ever, it’s important to give someone time to correct. If you do notice problems, give them time to correct it. Allow a week to see if it improves, or a fortnight or even a month if need be. Just let the employee know what’s expected and exactly how they need to improve.

Read more here about getting the first six months of employment right.

Can you extend a probationary period?

With labour in short supply, you might be tempted to extend an employee’s probationary period, effectively giving them a second chance. But are you allowed to do this?

The answer is that it depends on what the contract of employment says. Some employment contracts will provide that the employer can extend probation in certain situations. If the employee is covered by an Award or Agreement, you also need to be mindful of this too.

At the same time, always remember that the employment laws, most notably the Fair Work Act 2009, still apply. That means, that if you extend an employee’s contract beyond the statutory probation period, they will have the right to bring an unfair dismissal claim, as well as to all the other entitlements of other employees. 

With that in mind, there may be little point in attempting to extend a probationary period because the employee will have all the same rights as other permanent staff members.  

How to terminate an employee when they’re on probation

While you can terminate a probationary employee’s employment without having to go through some of the requirements of a permanent employee, you can’t just dismiss a probationary employee for any reason you like. 

Even if they can’t access unfair dismissal remedies, probationary employees can access unlawful termination remedies from the moment they start working for you. That means you can’t terminate their employment for a prohibited reason, such as temporary absence from work, union membership, making a complaint or on the basis of race, gender or pregnancy.   

If you are terminating employment for a legitimate reason, you don’t have to wait until the end of the probationary period before dismissing them. When you’ve done your best and you really have reached the point of no return, my view is to act now and begin the process of hiring someone to replace them.

Need a bit of help on how to do that in times like these? Read our Ultimate Guide to Hiring New Employees.

Want more? 

Terminating a worker’s employment can be fraught, even when they’re on probation. And never has there been more at stake than right now. Get in touch if you’re unsure about one of your new employees and need a guiding hand.