Probation periods are one of the most misunderstood areas of Australian employment law. Many business owners believe they can terminate an employee "for any reason" during probation, that probationary employees have fewer rights than permanent staff, or that a six-month probation period means they are protected from unfair dismissal claims for the full six months. All three beliefs are wrong, and acting on them exposes your business to claims that can cost $20,000 to $80,000 or more.
This guide explains how probation periods actually work in Australia, what rights employees have from day one, how to structure a probation process that protects your business, and what termination during probation looks like when done correctly.
A probation period is a defined trial phase at the beginning of employment during which the employer assesses whether the new hire is suitable for the role in terms of performance, capability, and cultural fit. In Australia, probation periods are typically 3 to 6 months, though contracts for senior or specialised roles sometimes specify up to 12 months.
The probation period is established in the employment contract. It is not set by legislation. The Fair Work Act 2009 does not mention "probation" at all. What it does set is the minimum employment period, which is the timeframe during which an employee cannot make an unfair dismissal claim. This is 6 months for businesses with 15 or more employees, and 12 months for small businesses with fewer than 15 employees.
The distinction matters. Your contractual probation period and the statutory minimum employment period are separate concepts. A 3-month contractual probation period does not override the 6-month (or 12-month) statutory period. And the end of probation does not change the employee's legal rights or your obligations as an employer.
This is the area where most employers get it wrong. Probationary employees in Australia have the same entitlements as any other employee from day one.
Minimum wages apply from the first hour worked. The employee must be paid at least the minimum rate under their applicable modern award or enterprise agreement, including any penalty rates, overtime, and allowances.
Leave entitlements accrue from the start date. Annual leave (4 weeks per year for full-time employees), personal and carer's leave (10 days per year), and compassionate leave (2 days per occasion) all begin accruing immediately. Long service leave accrual also begins from day one in most states, even though the vesting period is typically 7 to 10 years. See our leave entitlements guide for state-by-state details.
Superannuation at the current rate of 12% of ordinary time earnings must be paid from the first pay cycle, with no minimum earnings threshold since the $450 per month threshold was removed on 1 July 2022. Super is due quarterly by the 28th of the month following the quarter, and late payment triggers the non-deductible Superannuation Guarantee Charge.
Protection from adverse action applies at all times. Even during probation and even during the minimum employment period, employers cannot terminate an employee for reasons that constitute adverse action under Part 3-1 of the Fair Work Act. This includes termination because the employee made a workplace complaint, exercised a workplace right (such as requesting flexible working arrangements or taking personal leave), or has a protected attribute (race, gender, age, disability, pregnancy, religion, political opinion, or union membership). Adverse action claims have no minimum service requirement. An employee can lodge one on their first day.
Protection from discrimination under federal and state anti-discrimination laws also applies from day one with no qualifying period.
Treating probation as a risk-free trial period with no documentation or process is the fastest way to create expensive problems.
A general protections (adverse action) claim lodged with the Fair Work Commission has no cap on compensation. While most settle between $10,000 and $50,000, claims involving discrimination or whistleblower retaliation have resulted in six-figure payouts. The legal costs of defending a claim typically run $5,000 to $15,000 even if you win.
Beyond the direct legal cost, a terminated employee who feels the process was unfair can lodge complaints with multiple bodies (Fair Work, the Australian Human Rights Commission, state anti-discrimination bodies) and leave negative online reviews that damage your employer brand.
On the other side, keeping a poor performer beyond probation because you did not document the issues during probation makes termination far more difficult and expensive later. After the minimum employment period expires, the employee gains access to unfair dismissal protections, which require you to demonstrate a valid reason for termination and a fair process including warnings, performance improvement plans, and opportunities to respond.
The cost of replacing an employee who does not work out ranges from 50% to 200% of their annual salary when you factor in recruitment, onboarding, training, and lost productivity. For an employee on $80,000, that is $40,000 to $160,000. Use our employee turnover cost calculator to estimate the impact for your business.
A well-structured probation process protects your business legally and gives the new hire the best chance of succeeding. Both outcomes reduce cost.
Define clear, measurable performance criteria for the role. These should be specific enough that both you and the employee can objectively assess whether they have been met. "Good communication skills" is not measurable. "Responds to client emails within 4 hours during business hours" is measurable. "Cultural fit" is not measurable. "Attends team meetings prepared, contributes to discussions, and follows up on action items within agreed timeframes" is measurable.
Include the probation period, its duration, and the review process in the employment contract. Specify that employment may be terminated during probation with the notice period stated in the contract (typically one week) if performance criteria are not met. Do not include language suggesting the employer can terminate "at will" or "without reason," as this is not how Australian employment law works.
Prepare an onboarding plan that covers the first week (systems access, introductions, initial training), the first month (role immersion, first assignments), and the full probation period (escalating responsibilities, milestone reviews).
Conduct structured check-ins at minimum monthly, ideally fortnightly for the first three months. Each check-in should review progress against the defined criteria, identify any performance gaps, agree on support or training needed, and be documented in writing with a copy provided to the employee.
The documentation does not need to be elaborate. A simple email after each check-in summarising what was discussed, what was agreed, and any concerns raised is sufficient. What matters is that there is a written record. If you later need to terminate and the employee challenges the decision, your documentation is your evidence of a fair process.
If performance issues arise, address them early and specifically. "Your work needs to improve" is useless feedback. "Your client reports have contained factual errors in 3 of the last 5 submissions, specifically the revenue figures in the March report and the headcount data in the February and April reports. Here is what accurate reporting looks like, and I need to see this standard met consistently over the next 4 weeks" gives the employee a clear understanding of the problem and what success looks like.
Provide the resources and support the employee needs to succeed. If they are struggling because they were not given adequate training, access to systems, or clarity about expectations, that is a management failure, not a performance failure. A Fair Work Commissioner reviewing a termination will look at whether the employer gave the employee a genuine opportunity to meet expectations.
Conduct a formal probation review at or before the end of the probation period. This meeting should explicitly confirm whether the employee has passed probation and is transitioning to ongoing employment, has probation extended (with specific reasons and a defined extension period), or is being terminated (with reasons documented and notice provided).
If the employee has met expectations, confirm this in writing. A simple letter stating that probation has been completed and the employee is now a confirmed permanent member of staff provides clarity for both parties.
If extending probation, document the specific areas that need improvement, the support being provided, and the timeframe for the extension. Extensions should be reasonable (typically 1 to 3 months) and clearly linked to addressable performance issues. Indefinite or repeated extensions can be challenged as unfair.
If termination is necessary, the process must be handled carefully even though unfair dismissal protections may not yet apply.
Provide the contractual notice period (typically one week during probation) or payment in lieu of notice. Check the applicable modern award, as some awards specify minimum notice periods that override contractual terms.
Pay all outstanding entitlements including wages to the termination date, accrued annual leave (paid out on termination at the employee's base rate), and any accrued long service leave if the employee has reached the vesting threshold in their state. Super must be paid on all ordinary time earnings up to and including the final pay period. Use our employee cost calculator to verify you have accounted for all entitlement components.
For guidance on calculating final pay, see our dedicated article.
Have the termination conversation in person (or via video call for remote employees), with a witness present. Explain the reasons clearly and refer to the documented performance issues discussed during probation. Provide a termination letter confirming the last day of employment, notice period (or payment in lieu), and entitlements to be paid.
Do not terminate for reasons related to a protected attribute, the employee exercising a workplace right, or the employee making a complaint. These terminations are unlawful regardless of the probation period.
Failing to document performance issues during probation and then terminating at the end with no paper trail. This exposes the business to adverse action claims because the employee can argue the real reason for termination was something other than performance.
Assuming probation means no legal rights. As covered above, employees have full NES entitlements, super, and protection from adverse action and discrimination from day one.
Setting vague performance criteria. If you cannot articulate what "success" looks like in specific, measurable terms, you cannot fairly assess whether the employee has achieved it.
Allowing probation to expire without a formal review. If the probation period ends and nothing is said, the employee is generally deemed to have passed. If performance issues emerge later, you have lost the opportunity to address them in the lower-stakes probation context.
Not checking the applicable award. Some modern awards specify minimum probation-related conditions (such as notice periods) that override your employment contract. Always verify your contract terms are at least as favourable as the award minimum.
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Can I extend a probation period?
Yes, provided the extension is reasonable, the employee is informed before the original probation period expires, and the reasons for extension are documented and communicated clearly. Most extensions are 1 to 3 months. The extension should be confirmed in writing and signed by both parties.
What is the minimum notice period during probation?
This depends on the employment contract and the applicable modern award. Contracts typically specify one week. Some awards specify minimum notice periods that may be longer. Always check the relevant award. The National Employment Standards set a minimum of one week's notice for employees with less than one year of service.
Can a probationary employee claim unfair dismissal?
Not during the minimum employment period (6 months for large employers, 12 months for small businesses with fewer than 15 employees). However, they can lodge a general protections (adverse action) claim at any time, which has no minimum service requirement and no compensation cap.
Do I have to pay out annual leave when terminating during probation?
Yes. All accrued but untaken annual leave must be paid out on termination, regardless of how long the employee has been employed. If an employee worked for 3 months of a probation period, they will have accrued approximately 1 week of annual leave, which must be paid at their base rate.
What is the difference between probation and the minimum employment period?
Probation is a contractual term set by the employer, typically 3 to 6 months. The minimum employment period is a statutory concept under the Fair Work Act (6 or 12 months) that determines when an employee can access unfair dismissal protections. They are separate and independent. A 3-month probation period does not shorten the statutory minimum employment period.
Should I use a probation period for casual employees?
Casual employees do not typically have probation periods because their employment is characterised by no firm advance commitment to ongoing work. However, if a casual employee works regular, systematic hours for 6 months, they may be eligible for casual conversion to permanent employment, which involves a different set of considerations.
Disclaimer: We review and check articles periodically. At the time of writing, this information was up to date from our assessment. Employment law changes regularly. Always verify current requirements with Fair Work or a qualified employment law professional for advice specific to your circumstances.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
Employment Hero Gold Partner, CA-qualified, and Xero Certified, we replace fragmented finance and HR processes with one responsive, senior-level function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
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