What every employer needs to know about probationary periods.
Probationary period, orientation period, training period, onboarding period, introductory period. No matter what you call the first 30, 60, or 90 days of employment, there are pros and cons, period. So before implementing a "Probationary Period" at your company, let's consider the purpose of such an arrangement.
For most private employers in the US, probationary periods are entirely voluntary. The only exception to this rule is for employers in the state of Montana, where employees must satisfy a probationary period before they are terminated. From our experience, the general goal of a probationary period seems to be focused on the ability for employers to notify employees that their performance is being monitored during a designated period of time, i.e., 90-day probationary period. The employees will either "pass or fail" the "test" during their probationary period and may be terminated on or before the period is complete. Now you may be thinking, "we’re an at-will employer, which means we can terminate an employee at any time, right?".
Just for a quick review, in the 49 states where probationary periods are voluntary, the at-will doctrine allows either employee or employer to end the employment relationship at any time (within reason). So how would a probationary period change that? In our opinion, it doesn't. An employer can choose to terminate the employee at any point during the probationary period or after that period of time is over. If anything, probationary periods often confuse the employee. The employee may have the misconception that once they're hired and "pass" the probationary period, their job is more secure, which usually isn't the case. Managers at times will also have the idea that once employees cross a line in the sand, they can't be terminated, which is also untrue.
Don't get us wrong. If a company is diligent in coaching, training, and onboarding during that initial period of time, we think it's a great practice. In fact, we would highly encourage it! If that is the case, though, consider calling it something with a more positive connotation, such as an "Onboarding Period" or "Training Period."
Another use for probationary periods is related to employee benefits. Adding a 30, 60 or 90 day “waiting” time before employees are eligible for benefits such as vacation, paid time off, and other benefits is a great way to protect your business. Some states and municipalities have required paid sick leave which may have specific requirements related to probationary periods. Make sure to check your local legislation to ensure you are in compliance. Update any policies you have regarding employee benefits and include the amount of time the employee will be ineligible for the benefit.
Lastly, we want to address probationary periods' effects on State Unemployment Insurance (SUI). In most cases, probationary periods do not impact lessening an employer's financial burden if an employee is awarded unemployment. There are few exceptions to the rule, such as states, like Florida. In most cases, formal probationary periods are not correlated to the amount paid out to an employee for unemployment.
Employers should also note that probationary periods do not protect against claims of discrimination. Whether you are terminating a tenured employee or a newly hired employee, make sure that you are documenting the reasons for the termination. Please see our blog post on Why we love documentation (and you should, too!) found here.
Probationary periods can be a great tool for tracking performance and preventing large payouts of employee benefits if employment does not work out. Remember that probationary periods do not reduce your risk of a discrimination claim or reduce the financial burden if the employee is awarded unemployment.
We love HR so you can love what you do. simplyHR is an HR consulting firm located in Fort Collins, CO providing partnerships to companies in all 50 states. Our goal at simplyHR is to provide training, education, partnership, and resources to make Human Resources simple for small businesses.
The content of this website provides practical and HR best practice information and is not legal advice. simplyHR LLC does not provide legal advice or other professional services. While every effort is made to provide accurate and current information, laws change regularly and may vary depending on the state and/or the municipality your business operates in. The information provided from simplyHR is provided for informational purposes and is not a substitute for legal advice or your professional judgement. You should review applicable federal, state and municipality laws in your jurisdiction and consult with legal counsel as you deem necessary.