The interviewing process is an imperfect way to check if someone is the right fit for your company, as anyone who manages employees is well aware.
It takes a considerable period of time to determine an employee’s work habits, their cultural fit, their ability and their willingness to learn, and some or all of these elements may not be apparent at interview. An employee might oversell themselves, make misleading representations, and struggle to get on with your other employees, or simply prove to be a poor fit for your company.
Employers will often seek to guard against this by including a ‘probation period’ in the contract: a period of time (often 3 or 6 months) during which the company can terminate the employee for any reason with the minimum statutory notice. Often, where the company has not yet made a decision about the employee after the contractually stated probation period, they will seek to extend that period further.
However, it is important to remember that among the worst outcomes of any termination is an unfair dismissal claim. Whether or not the claim has any merits, an aggrieved employee can burn up an employer’s time, energy and resources by bringing a claim, and the employer will often have no choice but to incur fees in responding to it, fees that are unlikely to ever be recovered. It is a common misconception among some employers that a probation period operates as protection from such a claim.
Whether or not an employee is terminated during their contractual probation period will have no impact upon their ability to bring an unfair dismissal claim. It may affect their prospects of success in such a claim, but the bare fact that they can bring a claim already exposes the employer to a substantial costs burden.
The relevant period for the purposes of unfair dismissal as a remedy is the ‘Minimum Period of Employment’, which is defined in the Fair Work Act and cannot be amended by agreement. It is either a period of 6 months for a large employer (15 employees or more), or 12 months for a small employer (less than 15 employees). Once this time period ticks over, it won’t matter if the employee is in his or her probation period or not: he or she will be eligible to bring an unfair dismissal claim with all of the associated costs and risks for the employer.
As such, however employers choose to manage probation periods, it is absolutely crucial that they bear in mind the Minimum Period of Employment for each new employee. Prior to the expiry of the Minimum Period of Employment, an ironclad decision must be made with respect to the continuation of the employee’s employment. If the Minimum Period of Employment is allowed to pass and the company is still not sure if they are happy with an employee, they will be burdening themselves with the risk of an unfair dismissal claim and potentially exposing the company to those significant costs.
Practically speaking, if you manage employees you should always diarise the expiry of the Minimum Period of Employment for each new starter, and ensure that a decision is made before that date is reached. If you extend that employee’s probation period beyond the Minimum Period of Employment, you had better be prepared to face an unfair dismissal claim if you later choose to terminate the employee! For any further queries you may have, please contact any member of our employment team.