Dear HR law Auntie
I am the HR manager for a food retailer. We have a high turnover of staff, often with students and part-time workers, so we tend to engage new employees on contracts which have a probationary period so that we can see whether or not the relationship is likely to work out.
I’m aware that the statutory dismissal and disciplinary procedures which came into effect last October mean that we are meant to follow certain processes before dismissing employees, but we’ve never bothered with a formal procedure for employees who are still on their probationary periods. It just doesn’t seem worth the hassle if they’ve only been in employment for a few weeks. Please confirm that we’re not doing anything wrong here.
Perturbed by Probationary Periods
Probationary periods are used by many employers as a means of effectively having a “trial period” of employment to see whether or not the employee is capable of doing the job, works hard, gets on well with the team etc. Conventionally probationary periods will be for 3 or 6 months, and it will be possible for both parties to terminate the relationship by giving a relatively short period of notice during this time. For example, if the contract usually requires the employer to give three months notice before dismissing the employee, during a probationary period it may be possible for the employer to terminate the relationship on one month or even one week’s notice. Clearly this makes it more cost effective for the employer to terminate the contract when the employee is not suited to the job.
As you are clearly aware, the right to bring a claim for unfair dismissal in the majority of cases (there are a few exceptions such as whistle blowing and pregnancy related dismissals) only arises after an employee has one year’s continuous service with his employer. Before the Employment Act 2002 (Dispute Resolution) Regulations 2004 (“the Regulations”) came into force, many employers therefore approached dismissing employees with less than one year’s service with a fairly laid back attitude. Provided that there was no potential discrimination claim, employers would frequently cut corners on the usual process for dismissing employees, safe in the knowledge that the employee could not then bring a claim for unfair dismissal.
So, have things changed under the new Regulations?
The answer is that the new Regulations have certainly made this laid back attitude more risky. Strictly speaking, the new Regulations apply to all employees, regardless of length of service. Therefore, if you are dismissing an employee who has been employed for only a month, you are still expected to go through the basic three step process of writing down the nature of the conduct which gives rise to the potential dismissal, call a meeting with the employee to discuss this and confirm the decision in writing, and give the employee the right to appeal. There is nothing in the Regulations which says that this procedure does not apply to employees who have less than one year’s continuous service.
However, failure to follow the Regulations does not give rise to a claim for unfair dismissal where the employee has less than a year’s service. So why is it now more risky for employers to fail to follow the new procedural rules when employees are still on their probationary periods?
The answer is that the Regulations provide that a failure to follow the statutory procedures will affect the award of compensation in any subsequent employment tribunal claims. An employment tribunal is required to increase compensation by 10 per cent, and has the discretion to increase the award by up to 50 per cent where the employer has failed to follow the correct procedure (unless such adjustment would be unjust or inequitable). This uplift on compensatory awards is not limited to claims of unfair dismissal – it applies to other Tribunal claims including for discrimination or failure to pay holiday pay. A failure to follow the procedures can therefore be “piggy backed” onto another claim, even where the employee has less than one year’s service.
Therefore, if you dismiss an employee who is on a probationary period and don’t follow the statutory processes, this can have serious financial consequences if the employee subsequently brings a successful claim (for example, for race discrimination). Any compensatory award made by the employment tribunal would be increased by between 10 and 50 per cent. A compensatory award of GBP 30,000 could therefore be increased to as much as GBP 45,000, just because the basic statutory procedure was not followed.
You would therefore be best advised to re-consider your policy of systematically not following the statutory procedures when you dismiss an employee who is on a probationary period. Commercially this may still be a viable option if you are sure that the circumstances surrounding the termination could not give rise to any other statutory claim (such as discrimination). However, this may not always be a simple decision to take and it is impossible to predict how any one employee will react in a given situation. Therefore, in many cases, given that the time taken to follow the basic procedures is likely to be minimal compared to the cost which could be incurred if a subsequent claim is brought by the employee, the statutory three-step procedure should be followed.