23/10/2013

By David Murphy, senior associate at Fox Williams LLP


When updating your standard employment contract in preparation of hiring new staff, whether or not to have a probationary period is often a key issue debated by managers and HR teams. This article looks at the pros and cons of having probationary periods, or indeed not having them.

Having probationary periods

What it typically involves:

The employment contract states that an initial period of employment, usually the first 3 to 6 months, is a probationary or “trial” period during which employment can be terminated by either party providing a shorter amount of notice than they will have to provide after the probationary period. Staff are dismissed during their probationary period if they do not meet the standard required for their role.

Pros:

1. Manages expectations of the employee from the outset. They know that they are being taken on a trial basis. It should help to encourage hard work from day 1.
2. Provides a clear framework/context for an early dismissal if they do not meet the standard required for their role. "You have not passed your probationary period" is a clear, easy to understand concept for the employee and anyone advising him — and, if it comes to it, a Tribunal. It is, on the face of it, a non-discriminatory reason for dismissal.
3. Cheaper to part company with the employee at an early stage if they turn out not to be up to required standard.
4. Not time intensive. During a probationary period of 6 months, an employer could have routine/scheduled reviews at perhaps the 1 month, the 3 month and (just before) the 6 month points.

Cons:

1. Poor performance may not be dealt with in a timely fashion if issues/problems are not discussed until routine review meetings.
2. Perhaps less likely that the employee will improve his performance than if he experiences the seriousness of a disciplinary/capability procedure.
3. Not providing warnings is one reason for which a Tribunal could award a 25% uplift in compensation if the employee brings a claim which is successful, as a result of non-compliance with the ACAS Code. However, the risk of a claim being brought might be low given employees cannot claim "ordinary" unfair dismissal until they have two years' service (if they joined after 6 April 2012).

Not having probationary periods

What it usually involves:

The employment contract does not refer to a probationary period and the notice period is not shorter in the early days of the employment relationship; it is the same on day one as it is 6 months later. Employees who do not meet the standard required for their role are treated in the same way as staff who have longer service would be treated. This may involve being performance managed out of the business through the employer’s disciplinary/capability procedure.

Pros:

1. Disciplinary/capability procedure is likely to be ACAS Code compliant so it is less likely that there will be an uplift in any Tribunal compensation awarded.
2. Gives the employee more opportunity to improve. This might be worthwhile if it is difficult for the employer to recruit staff, either generally or for the particular role, and/or if there is track record of employees improving when given the chance.

Cons:

1. Performance management is time consuming and does not always work. A disproportionate amount of time could be spent/wasted on individuals who end up leaving the business. The amount of time spent might also be disproportionate to the risk of an unfair dismissal claim (employees cannot claim "ordinary" unfair dismissal until they have two years' service, if they joined after 6 April 2012).
2. Does not manage expectations so well; new employees may feel less like they are working on a trial basis and more like they are “in the door” and secure in their roles unless they do something really wrong.
3. Parting company with the employee at an early stage is more costly than it needs to be.

David Murphy is a senior associate at Fox Williams LLP. David can be contacted at DMurphy@foxwilliams.com.