When an employee begins working for your company, you might place them on 'probation'. However, if you consider extending an employee's probationary period, you may be concerned about whether it is legal and, if so, under what circumstances. In any event, you must comply with the Fair Work Act to ensure you do not face any claims for unfair dismissal. This article will explore how you can extend an employee's probationary period and some important considerations you should make to avoid an unfair dismissal claim.
What is a Probationary Period?
A probationary period occurs at the start of a permanent full-time or part-time employment relationship. The period allows you to assess whether a new employee is suitable for the job. If your newly hired employee is not suited to the role, there are fewer obstacles to terminating their employment. Whilst you can generally decide the length of your employee's probationary period, an award or registered agreement may provide otherwise.
Your employee's probationary period will usually be set out in the employment contract. However, suppose the probationary period is ending, but you are still unsure whether your employee is suitable for the job. In that case, you may still be able to extend the probationary period.
Is It Worth Extending?
Extending an employee's probationary period may sound enticing. After all, extending the period can give you more time to assess whether your employee is suitable for the job. However, there are a few things you should consider before doing so.
If you extend your employee's probation period and this exceeds the minimum employment period under the Fair Work Act, you could risk exposing yourself to an unfair dismissal claim.
An unfair dismissal claim can arise if the dismissal was:
- harsh, unjust or unreasonable;
- not a case of genuine redundancy; and
- not compliant with the Small Business Dismissal Code (in the instance of small businesses).
Under the Fair Work Act, an employee is not able to make unfair dismissal applications if they complete at least:
- one year of work for your small business with fewer than 15 employees; or
- six months of work for your business with 15 or more employees.
Although some employment contracts will stipulate probationary periods of only three months, technically speaking, new employees cannot make unfair dismissal claims. However, this may only be the case if they have not already worked for six to twelve months, depending on the business size.
For the minimum employment period, a small business is a business that has fewer than 15 employees at the time of dismissal. Employees who fall under this section include:
- the employee or employees who face dismissal;
- casual employees if you have employed them on a regular and systematic basis; and
- any employees of associated entities, including those based overseas.
However, if you extended your employee's probationary period, the provisions under the Fair Work Act could apply. In this sense, your employee could claim unfair dismissal if:
- you extended their probationary period; and
- this period allows your employee to meet the minimum period of employment under the Act.
If you extend your employee's probationary period, it goes without saying that you must continue paying their entitlements. An employee on probation is entitled to the same benefits as a full-time or part-time employee who is not on probation. This includes accrued paid leave.
If you dismiss your employee before the end of their probation, they are entitled to be paid out any accrued leave as part of their final pay. In addition to receiving their unused entitlements, you should give your employee written notice of termination. The written notice should specify the period of notice given and the date their employment will end.
A probationary period allows you to assess whether a new employee is suitable for your business. The employment contract will usually outline probationary periods. Although, you may be able to extend the probationary period:
- by agreement between you and the employee; or
- if the terms of the employment contract allow you to extend the period.
However, extending the period can expose you to a claim for unfair dismissal. For example, this can occur if you extend your employee's probation exceeding the minimum employment period under the Fair Work Act.