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What is an Employee Probationary Period?

Key Takeaways

1. An employee probationary period is organized at the discretion of an employer and undertaken at the start of a new employment agreement. They can last anywhere from 3 months to 6 months in length. It is not unusual though to see shorter or longer periods. 

2. If a probationary period is expected to be undertaken by an employee, the provisions and expectations for that period must be clearly outlined in the initial employment contract. Provisions should include how long the period lasts, the assessment method used, a notice period, and a mechanism to show the employee understands the terms given. 

3. Generally, it is easier to terminate a new employee during their probationary period if they do not meet the standards or expectations that are clearly outlined in the job description and initial employment contract. Each country has different laws regarding termination procedures and what constitutes fair dismissal. 

4. Some benefits of incorporating a probationary period into the overall recruitment process are that it can be cost-effective, it gives the employee a chance to get noticed, and both parties in the agreement have time to scope out if they fit or like the role. Some downsides include some heightened legal risks, a chance employees may feel undervalued, or even deter them from applying in the first place.

5. A Global PEO can help support companies hiring employees abroad by creating compliant employment contracts that include a probationary period. 

Introduction

When hiring a new employee to your company, sometimes the recruitment process you put them through is not enough to know if they are a truly good fit. This could be based on their performance, commitment, or just general suitability for the role. It is also possible that on the employee’s side, the job may not be exactly what they were looking for or wanted to do after all. Implementing a probationary period can help mitigate some of these challenges with new hires and give both parties some time to see if they work well together.

This article covers all the things you should know about employee probationary periods and some of the benefits and downsides of implementing this strategy at the start of the employee-employer relationship.

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What is a probationary period?

An employee probationary period refers to a set period of time, generally given at the start of a working relationship (sometimes even a new working relationship with a previous employee who has come back), where an employee is assessed to check if they are right for the role by the employer. In some countries, a probation period can form part of a conditional offer of employment and the new employee must complete their probation period successfully to then go on to be offered unconditional employment.

It is entirely up to the employer on how long this probationary assessment period goes on, but it usually lasts anywhere from 3 to 6 months. Implementing a probationary period is not a mandated right or obligation and is up to the discretion of each company as part of its recruitment process.

However, if a probationary period is implemented by a company, there are a few things that employers should do before and during the time the new employee is completing their probationary period. Before they begin their work duties, it’s important to clearly specify that there is a probationary period in place. This will be found within the employment contract given to the employee upon beginning their employment and must include provisions outlining: 

  • How long the probationary period lasts
  • A minimum notice period in the case the employee is found to not fulfill the needs of the role or when an employee can notify if they want to end the agreement
  • How the employee will be assessed during the probationary period
  • All conditions must be clearly set out and a mechanism in place to show that the new employee understands what is required of them during the probation period

Regardless of whether an employee is dismissed early, leaves on their own accord, or is successful throughout the probationary period, employees must be treated fairly and be provided with all mandated entitlements for this time. It’s important for international companies hiring employees in other countries to check the target country’s labor laws around entitlements and termination procedures. For example, the laws surrounding probationary periods in China are likely different from the laws in your home country.

What are the benefits of probationary periods?

Often, there is some confusion around whether having a probationary period is a productive move for a company to have as part of their hiring process. Here are some reasons why adding a probation period can be beneficial.

1. Implementing a probation period can be cost-effective

Depending on the conditions set by a company on pay and hours, it is possible for companies to save money with new hires undertaking a probationary period before being offered a permanent contract. In some instances, the period can attract a lower hourly or salary rate until the probation period comes to an end. If for any reason the new employee decides to leave or does not meet the probation conditions, companies will save money in comparison to if hired straight into a full-time agreement with no probationary period.

2. Both parties have more time to scope out if it is a right fit

The job market is highly competitive and finding top talent can be difficult in the best of circumstances. Just because an applicant has an outstanding resume and interviews well, doesn’t necessarily mean that they’ll always fit. This can also be said from an employee perspective where they find they do not actually like their new role as much as they thought they would. Having a probation period right at the start gives both parties the freedom to opt out of the agreement during this time and can give your company more time to find an even better fit.

3. Employees have a chance to get noticed

On top of being a great chance for employers to scope out new employees, it also gives a new employee a chance to get noticed. Especially in bigger companies, this can also give an employee a chance to highlight their skills, which may open up a better opportunity within the company at the end of the probation period.

Are there any downsides to probationary periods?

A probationary period may not be for every company, and this is because some of the downsides can be more risky and costly than not having one implemented. Here are some downsides that are associated with having a probation period as part of the initial stages of employment.

1. Employees can feel undervalued during their probationary period

It is common from an employee’s perspective to feel added pressure when having to go through a probationary period. There can be even added stress if they will be joining a new company and taking on new responsibilities and training. Sometimes this added stress and pressure can cause new employees to have lower morale during their probation period. It is important that new hires working through their probation period feel equally as part of the team so that they do not lose confidence in the work they are doing or feel like they are at a high risk of losing their new position.

2. Employee probation periods can be a legal risk if not conducted effectively

Having clear and coherent contract policies that incorporate all expectations related to a set probationary period is imperative. This begins to get tricky to navigate when hiring employees internationally as many countries have strict conditions around termination and unfair dismissal. However, there is some leeway for termination during probationary periods, but the reasoning must be connected to the original contract provisions.

3. It can have a negative effect on a company’s reputation

If prospective applicants see that they may need to undertake a probationary period to secure a permanent contract, it can deter them from applying.

Video: Workplace Probation Essentials

Horizons supports overseas hires through probationary periods

If your company is looking to expand your operations overseas, whether in the form of trialing a new market or diversifying your team to include international employees, hiring a Global PEO such as Horizons can support your company navigate country-specific compliance rules around probationary periods. Horizons can hire employees on behalf of businesses and draft contract arrangements that include clear and coherent policies for probationary periods. Contact us today for support.

Frequently Asked Questions (FAQ):

Whether or not a company implements a probationary period as part of any new employment agreement is completely at their discretion. If the conditions set within the probationary period do not breach any labor laws applicable to the country it is undertaken in, then probation periods are completely legal and allowed. It is important that both parties have a clear understanding of what is required of them during this period, what to expect when the probationary period ends, and the methods that will be used to assess their competency in the role. 

It is possible to terminate an employee during their probationary period. However, there must be adequate evidence and notice for why they are being terminated early. It is important that the reasons and evidence match any conditions set out in the initial contract stipulating the provisions related to the probationary period.

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