Probation Periods in Australia: What Employers Get Wrong

You've hired someone new, the contract says six months' probation, and you're assuming that clause has your back if things don't work out. Here's the uncomfortable bit: probation clauses and employment law run on different clocks. Plenty of small business owners discover that at the exact moment it's too late to fix.

This post covers what a probation period actually does, what it doesn't, what your new starter is entitled to while they're on one, and how to end things properly if the fit isn't right.

What a probation period actually is

A probation period is a contract tool, not a law. You set it, usually somewhere between three and six months from the day the employee starts, and it gives both sides a defined window to test whether the role is a good fit. The Fair Work Ombudsman's guidance on probation confirms it's normally the employer who decides the length.

Used well, probation is a solid management tool. It creates natural checkpoints for feedback, makes expectations explicit, and forces a decision by a set date instead of letting a marginal hire drift quietly into year two.

What probation doesn't do is switch off employment law. Someone on probation has the same entitlements as any other employee, including everything in the National Employment Standards. Probation changes how you manage someone. It doesn't change what you owe them.

The clock that matters isn't in your contract

Here's the misunderstanding that catches the most employers. Unfair dismissal protection isn't linked to your probation clause at all. It's linked to the minimum employment period, which is set by the Fair Work Act, not by you.

To be eligible to lodge an unfair dismissal claim, an employee must have worked for you for at least 6 months, or 12 months if you're a small business. They also need to be covered by an award or enterprise agreement, or earn less than the high income threshold. That figure changes every financial year, and the current amount is always listed on the Fair Work Commission's high income threshold page.

Notice what's missing from that list: your probation period. A three-month probation clause doesn't give you three months of lower risk followed by nine months of the same. And extending someone's probation, the move a lot of owners reach for when they're unsure about a hire, does nothing to the statutory clock. If you're not a small business, unfair dismissal eligibility arrives at six months whether the contract says the employee is "still on probation" or not.

The flip side is worth knowing too. If your probation period runs longer than the minimum employment period, the extra months carry no legal weight for unfair dismissal purposes. A 12-month probation clause at a 20-person company doesn't delay anything past the six-month mark.

Counting to 15 is trickier than it sounds

Whether you get the 6-month or 12-month period depends on whether you're a small business employer, defined as any business with fewer than 15 employees. That's a headcount, and it's wider than most owners expect. At the time of the dismissal, you count:

  • every employee, including the person being dismissed and anyone else being dismissed at the same time
  • casual employees who work on a regular and systematic basis
  • employees of associated entities, including any based overseas.

So a business with 13 permanent staff and 2 regular casuals isn't a small business, and the 6-month clock applies. The headcount is taken at the earlier of when the employee is told their employment is ending or when they're given notice of termination.

What your new starter is entitled to during probation

This is the other area where employers slip up, usually by accident rather than design. According to the Fair Work Ombudsman, a full-time or part-time employee on probation:

  • accrues paid leave, including annual leave and sick leave, from day one
  • can take that leave during the probation period
  • is entitled to notice if you end their employment
  • must have their unused accumulated annual leave paid out if they don't pass probation.

On notice: for an employee with one year or less of continuous service, the minimum is one week. It has to be given in writing and state the day employment ends. You can pay out that week instead of having the person work it, calculated at their full pay rate. Casual employees are the exception, as the National Employment Standards don't require notice for casuals.

The protections that apply from day one

Unfair dismissal has a qualifying period. General protections don't. The Fair Work Act's general protections cover every employee from their first day, and the FWO's workplace discrimination guidance spells out that probationary employees are included.

In practice, that means you can't dismiss someone, even in week two, because they:

  • used a workplace right, like asking a question about their pay rate
  • have a protected attribute, such as pregnancy, age, disability or family and carer's responsibilities
  • are, or aren't, a union member.

An employee dismissed for one of those reasons can lodge a general protections claim with the Fair Work Commission within 21 days, and the minimum employment period is no shield at all. This is why "they're on probation, I don't need a reason" is dangerous thinking. You don't need to run a full performance management process during probation, but you should always be able to point to a legitimate, work-related reason for the decision, and have notes to back it up.

Ending employment during probation, step by step

If you've decided the fit isn't right, here's a clean process:

  1. Make the decision before the probation end date, not after it quietly slides past.
  2. Meet with the employee and give them the work-related reasons.
  3. Provide written notice stating the day employment ends.
  4. Give at least the minimum notice period, or pay it out in lieu at the full rate.
  5. Include unused annual leave in the final pay.
  6. Keep a written record of the reasons and the steps you took.

If the employee has already passed the minimum employment period, the bar rises considerably. Small business employers should follow the Small Business Fair Dismissal Code, because the Commission will find a dismissal fair if you can show evidence the Code was followed.

One last practical tip: diarise the probation end date the day the contract is signed. The single most common probation mistake isn't legal at all. It's letting the date sail past without a decision, which means the review conversation never happens and a shaky hire becomes a long-term problem.

General information, not legal advice

This article is general information only, current at the date of publication. It isn't legal advice, and it doesn't take your specific circumstances into account. For advice on your situation, check the primary sources below or speak to a workplace relations professional.

Sources:

If you'd rather not build your probation paperwork from scratch, TeamGrid's Employee Onboarding & Probation Pack includes editable probation review templates and letters designed around the obligations covered in this post. It won't make the decision for you, but it will make sure the process around the decision holds up.