Employment Probation Period: Small Business Guide (+ Policy Template)
This article is part of a larger series on Hiring.
An employment probation period, referred to as a probationary period, is a time frame used to determine if the new hire is the right fit for the position and the company is right for the employee. A typical time frame for a probation period is around 30/60/90 days. Once you’ve determined your time frame and what benefits will be available during that time, you should document your policy and share it with your team via the employee handbook and other documentation.
Although we are using the term throughout this article for consistency, we recommend calling probation period by another name, such as introductory, training, or orientation period. Courts do not like the word “probation” because of the implication that once the period is over, an employee becomes permanently employed or at least cannot be terminated without cause.
Click below to download our Employment Training Period policy template, which you can customize to meet your needs.
How to Implement an Employment Probation Period
To implement a probation period, you’ll need to select the time frame, create your policy, and provide documentation to your staff and new hires. You also need to determine what benefits the employee will receive upon hire versus what benefits will wait until after the employment probation period. Some benefits should be held until after this period ends, as courts will look for some reason a probation period exists—like the employee receiving some benefit upon completion.
Step 1: Determine Time Frame
The most common time frame for a new hire probation period is 60 to 90 days. However, you as the employer, can set any time frame you want to fully evaluate whether an employee fits your culture and can do the job—a process that can be sped up when you use a structured interview and better evaluate candidates during the hiring process. Below are examples of when each of the following 30/60/90-day time frames makes sense.
- 30 Days: Thirty days is a good time frame for an employment probation period in an entry-level job, such as food service or retail, where you’ll know fairly quickly if the employee is going to work out. For example, if an employee is able to show up on time, display a positive demeanor, get along with co-workers, and master your POS system, they’ll probably demonstrate those traits within the first few weeks.
- 60 Days: Sixty days is a good time frame to use as a probationary period in jobs with productivity metrics. For example, if you hire workers who must master skills, like assembling furniture, entering data, stocking shelves, or inspecting manufactured goods, you’ll need time for those employees to learn the job. After they master the skills, you’ll need additional time to evaluate whether they can meet your hourly or daily productivity goals.
- 90 Days: Ninety days is a good time frame to use for new hires in professional roles like managers or sales executives. The reason for the longer time frame is that you may want to see how they function in the job, as well as whether they’re able to build relationships, earn business, or motivate their team.
Step 2: Decide What to Include & Not Include
Perhaps the hardest part of implementing a probation period is deciding what you will and will not include during the employment probation period. The following benefits generally should be provided upon hire and not wait until after a probation period:
- Sick Leave: What happens if a worker calls in sick during their probationary time period? Some states, like California and New York, have mandatory sick leave laws that require you to allow time off for illness. California requires employers to pay employees for up to three days of sick leave per year. New York and other states have similar laws. In either case, you can’t wait and only offer sick leave after the probation is over. It may need to start accruing upon hire or be provided as a lump sum.
- Health Insurance: If you have over 50 full-time employees, you must provide health insurance to your employees. Some health insurance companies require this to be offered within the first 30 days. So even if your company has a 90-day probation period, if your insurance carrier requires you to offer new hires access to healthcare in their first 30 days, you must follow the insurance company’s requirements. Check with your carrier to ensure you’re following their policy.
A business should consider withholding some benefits and perks until after the probation period is over and it knows the employee can perform the job to its standards. For instance:
- Paid Time Off: Paid time off (PTO) in the form of vacation can be withheld until after the probation period. Typically, this is done by accrual, wherein the employee will not be eligible to take PTO until after they have accrued their time. Be sure you do not include sick leave as part of this policy, as it may violate the laws listed above.
- Retirement Benefits: Wait to offer 401(k), stock options, or other retirement benefits until after the probationary period has ended. You should, however, provide new hires with the details of these plans so that they can begin participating in the plans immediately upon eligibility.
- Other Medical Insurance: While you may be required by your state laws to offer healthcare before the end of your chosen employment probation period, you may wait to offer dental or vision insurance.
- Life insurance: Life insurance is usually elected and paid for by the employee. Even in the case where the employer partially or fully pays for it, you are able to withhold this benefit until after completion of the probation period.
- Company Perks: Some companies offer unique perks, such as flexible work schedules, half-day Fridays, and incentive bonuses, as part of their employment. It is advised to wait until after the probationary period is over to offer these types of benefits, except benefits that every employee receives, like half-day Fridays. It would be odd to require new employees to work when the business may be effectively closed.
All employees, especially those new to your company, should be given a copy of the company handbook, any company policies, job description information, and the tools to complete their assigned jobs. This also includes onboarding, training, and access to company resources, as well as all stipulations about a probationary period and its inclusions.
Step 3: Create Your Policy
After you decide the time frame and benefits that you want to include, it is time to create and document your policy in writing. Use the provided template as a starting point. This document should include the above-mentioned, as well as any rules that apply during the probation period at work, such as performance metrics, goals, and job expectations.
Follow these steps to create your employment probation period policy:
- Start with a paragraph that describes the policy time frame terms and lists employment as “at-will.” This ensures both the employee and the employer understand the duration of the trial employment and that either party may end employment for any legal reason. Be aware that if your company’s actions effectively negate the at-will terms, a court will view those actions as overruling the at-will language in your policy.
- List all the benefits that are included during the probationary period.
- List some or all of the benefits that will be received following the successful completion of the probationary period.
- Reiterate your “at-will” employment status.
- You can also include what is expected of the employee during the probation period, any documentation the employee will receive, such as the company handbook, and any performance reviews that will be performed.
Step 4: Seek Legal Advice
If set up incorrectly, a probationary period may violate local labor laws and employer rights. For instance, as mentioned above, some states make it illegal to postpone sick leave until after the probation period. There is also a potential risk of the employment probation period undermining an employee’s “at-will” employment status (employees may feel their employment is guaranteed following a probation period). Please seek legal advice before implementing an employee probation program. Legal services can help small businesses with legal documentation, creation of policies, and other legal matters required to stay compliant with federal and state laws.
Additionally, be sure that you do not include any language in your policy that could be considered discriminatory. Federal labor laws, like the Americans with Disabilities Act and Title VII of the Civil Rights Act, protect employees from day one. (This, of course, would also apply during a probationary period termination, so be sure your reason for terminating an employee during this time is legally sound.)
We cover legal considerations in more detail below.
Step 5: Update Employee Handbook
Once your employment probation period policy is created, add it to your existing employee handbook and new hire documentation. This will ensure that your policy is read and signed before your new employee’s first day. This also creates a legal document that clearly outlines the details of the probation period.
Step 6: Share Policy With Staff
Once you have finalized your policy, you need to share it in writing with your staff. Discuss expectations and provide training, resources, and feedback. Be sure to also include your employee probation period policy in your job ads, interviews, and job offer letter. This clarifies upfront that the new hire will be subject to a probationary period.
Additionally, you can provide new hires with a probation period letter that explains the policy. In the letter, reiterate your probation policy, and have the employee read, sign, date, and return a copy of the letter on their first day of employment. A letter signed by the employee may prove that the employee was fully aware of the probation policy in case of a wrongful termination lawsuit.
Once an employee is hired under the new program, make sure you’re giving them good employee performance feedback so that they understand your expectations and can proactively address issues within the probationary period.
Pros & Cons of Implementing an Employment Probation Period
Some employers feel that using an employment probation period at work reduces their hiring risk. There are also some downsides to a formal employment probation period, however. For example, courts may interpret your probation period to imply that employees can only be terminated for cause after it’s over.
|Allows a new hire to determine whether the job is a fit, giving them an easy out if it isn’t||Once the probation period is over, an employee may feel they cannot be terminated, leading to employee discipline issues|
|Allows the employer to terminate an employee during their probation period, so long as it is not for a discriminatory reason||Setting up an employee probation period may violate labor law in certain states that don’t honor at-will employment—verify your state’s labor laws|
|Employers avoid paying for expensive perks until employee is proven||Documentation must be rock-solid—not only should you document your policy to protect yourself, but ensure that all employees, and especially new hires, are made aware of the employment probation period policy|
Here’s the legal takeaway: Courts will look at both your policy language and your company’s actions. That means you can state a hundred times in your policy that employees are at will during and after their probationary period. But if your company takes certain actions that contradict those statements, courts may give your actions more weight and effectively negate your at-will language, meaning you can only terminate employees for cause.
As we discussed in the opening, using the word “probation” can imply a policy of only terminating employees for cause once their probationary period ends. Even a mere implication can lead to legal trouble for your company.
Of course, simply using the word “probation” is only part of the issue. In wrongful termination cases, courts will look for a legitimate business reason to have a probation period and what benefit is given to an employee upon completion of the probationary period, like access to dental or vision insurance, for example. Ultimately, your company must ensure there’s some difference between benefits an employee receives during the probationary period and after, while also ensuring you’re not violating any state or federal employment laws by holding back any benefits during the probationary period.
As a quick refresher, at-will employment allows both employees and employers to end the employment relationship at any time, for any reason, with or without notice. Employers still cannot terminate employees for discriminatory reasons, such as pregnancy or disability.
If your company uses employment contracts, or your workers are governed by a union contract or collective bargaining agreement, and those contracts do not include any mention of at-will employment, then courts will hold you to your contract, not the at-will doctrine. That means you could face legal liability in the form of a wrongful termination lawsuit if you terminated an employee without cause.
If you are in an at-will state, a probation period is technically redundant. Both at-will and probationary status allow you to terminate employees at any time and for any non-discriminatory reason. In some cases, a probation period could actually limit a company’s ability to terminate employees. Courts have held that by completing a probationary period, an implied employment contract exists, making it more difficult for companies to terminate employees without cause.
Even if an employee probation period is redundant, you may still want to enact one. Here are some tips to keep your policy effective and compliant.
Be as clear and direct as possible with your language so there’s no ambiguity if a court needs to interpret your policy. Define the length of time—don’t make it longer than 90 days. Six months can be appropriate in certain situations, but generally, it’s best to keep your policy to 90 days or less. The longer your policy, the less likely courts are to side with you in the event of a dispute. Ensure there’s a discussion of at-will employment, too, both during and after the probationary period.
Performance is the reason to have a probationary period. Make sure your policy discusses performance reviews and that completion of the probationary period rests with the employee’s demonstrated performance and abilities to perform the core duties of the role. As an added bonus, if you face a wrongful termination claim, you’ll have documented performance review notes showing the employee was failing to meet your minimum performance standards.
An employment probation period can give both the new hire and the employer a chance to decide if they are the right fit for the job. While some employers like having a new hire employment probation period, it may not be necessary if your state allows the employment at-will doctrine as it would create redundancy and increased legal risks. If you choose to institute a probationary period, consider using our template and have your attorney review your probation period policy before implementation.