Probation serves as a period for both Employers and Employees to evaluate mutual suitability to perform particular work — competence, working environment, and compatibility with corporate culture are usually unknowns at the outset. There is a maximum probationary term depending on the nature of the position. The probationary term cannot be renewed and there are rules on the compensation that must be paid.
Although it is an initial trial period, the establishment and termination of probation is governed by law. Numerous cases of attempted unilateral termination during probation have led to complex disputes–disputes regarding notice and liabilities of the parties. This article is a discussion of the probationary relationship and its termination.
Overview
As probation allows payment of a salary below the market, to prevent abuse, the Labor Code 2019 fixes the minimum salary and limits the period of probation. Parties may agree on probationary terms as one of the terms of an Employment Contract. They may also execute a standalone Probationary Contract prior to signing an employment contract. Probation for a single position may be conducted only once, with a maximum duration ranging from 6 days to 180 working days, depending on the nature of the work or position held.
Upon conclusion of the probationary period, the Employer must notify the Employee of the results. If the Employer concludes that the probationer is qualified, the parties will continue performance if probation was part of an employment contract. If not, the parties will execute an Employment Contract without extending probationary arrangements. Conversely, if the agreed standards have not been met, the probationary relationship may be terminated by either party and there is no obligation to establish an employment relationship.
Early termination of probation does not give rise to an obligation to compensate for premature contract termination. Consequently, any provisions imposed by Employers subjecting Employees to, say, penalties for early termination are unenforceable. Likewise, if they terminate early, Employees are not entitled to compensation beyond time spent. If employment does not continue Employees have certain obligations. They must hand over company assets and work tools, compensate for damages caused to company assets and the like.
Right to Terminate Probationary Contracts Unilaterally
During probation, the Labor Law entitles each party to cancel the executed probationary contract or employment contract without prior notice. This mechanism provides flexibility, enabling both Employees and Employers to withdraw if they conclude that the position is not suitable. There are no complex termination requirements typical of normal employment contracts.
However, there are exceptions. For example, if the parties agree within the contract to a prior specific notice period or to obligations by one party or the other, or say, to the right of early termination, then such agreement is legally binding unless it violates statutory prohibitions. Therefore, despite the general principle of no prior notice and no special compensation as a result of early termination, it remains possible if mutually agreed.
Salary Entitlements and Handover Obligations
While a probationary salary may be agreed it must be at least 85% of the salary for the position for which the employee is applying. Even in the case of early termination; employers are obligated to pay probationary salary for actual working days completed.
Practical Recommendations for Enterprises and Employees
For Enterprises (Employers):
- Rigorous Contract Drafting: Eliminate clauses that impose “penalties for premature resignation” or “recruitment cost reimbursement” They are unenforceable. Where flexibility is desired, enterprises and probationer can agree on a reasonable prior notice period. Agreed notification is permitted.
- Transparent Asset Handover Procedures: Execute clear asset handover records for tools and equipment immediately upon onboarding. This serves as an evidentiary basis to request return or to pursue compensation should property be lost or damaged.
- Timely Salary Payment: Promptly confirm actual working time and promptly settle salary due, thereby avoiding delays and controversy.
For Employees:
- Careful Review of Binding Clauses: Be mindful of agreed terms such as prior notice for termination and custodial responsibilities for assigned assets prior to signing.
- Compliance with Handover Procedures: Notwithstanding the right to terminate probation, to prevent disputes Employees must return assets, complete necessary documentation, and fulfill agreed notice requirements.
Termination of probation should respect mutual agreements and be legally compliant.
