13 October 2015 Can you extend probation?

By Warwick Ryan, Partner and Simon Obee, Solicitor

In Brief

Probation periods are important to employers.  The probation period allows employers to gauge an employee's competence and character, before it gets tricky terminating them. There is, however, confusion around this status. As an employment lawyer, I am often asked whether an employer is able to extend the probation period of an employee who is not performing well – but perhaps not so abysmally as to warrant being terminated.   

length of probation

The first point that needs to be made is that probation periods are often mistaken as being for a three month period.  This is no longer the case. The Fair Work Act says that for organisations with:

  • less than fifteen staff (across a group) the probation period under the legislation is twelve months.  So, at any time during that first year, you can terminate that employee without reason being given and without a process of warnings.  There are a number of good reasons why you may choose to both give a reason and also have a process of appraisal – but the legislation does not require it.

  • For more than fourteen staff, the probation period is six months. 

length of probation

The answer is – in normal circumstances – no. Even where an employee has been unwell for much of the probation period and the employer – understandably – asks for their absence not to be included in the probation, the period of probation is fixed.

How can i engage a staff member to get a longer period of consideration?

One option employers often adopt is to put employees on as casuals. Unfortunately, this is no help if the employee's engagement is regular and systematic, in these circumstances, they will enjoy the same probation periods and can access unfair dismissal in the same way as a permanent employee.

There is another exemption under the Fair Work Act for contracts of a specified period.  A contract for a specified period cannot have an earlier termination clause.  –If you wanted to terminate an employee during the term of this type of the contract, you would have to pay out the balance of the period.  That could be expensive.

A more useful option is an "outer limit" contract.  These contracts are similar to contracts for a specified period, except that they also give employers the capacity to terminate employees earlier.  For example, the employer may be a larger organisation that engages people on 12 month contracts with an outer limit provision. This means the employer can terminate the employee sooner.

If the employer terminates outside the probation period (i.e. beyond six months) but before the end of that period (ie. 12 months), then (absent serious misconduct) the employer would have to go through the process of warnings.  If the contract simply reaches the end date, then there is no termination by the employer and, therefore, no right for unfair dismissal.  These contracts can be very useful.
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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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