While sometimes viewed as simply a formality in the hiring process, probation periods are actually designed as a built-in safety net for employers and employees alike. Under the Fair Work Act, this period (formally known as the Minimum Employment Period, or MEP) gives both parties time to assess whether the employment relationship is the right fit, without the risk of an unfair dismissal claim or notice period requirement if things don’t work out. 

What is the minimum employment period? 

According to the Fair Work Act, the minimum employment period is: 

• 12 months for small businesses (fewer than 15 employees) 
• 6 months for businesses with 15 or more employees 

This includes full time, part time and regular casual employees, even across associated entities. In some situations, long term casuals may have their time counted toward the minimum employment period if their work was consistent, regular and reasonably predictable. 

So, what are some valid reasons for dismissal during probation? 

During the probation period, an employer can end employment without triggering unfair dismissal protections as long as the decision isn’t discriminatory or unlawful and they have not exceeded the minimum employment period. Common valid reasons include: 

• Not the right fit for the role – The employee may lack the required skills, qualifications or just not meet expectations. 
• Performance issues – The standard of work, reliability or conduct isn’t where it needs to be. 
• Misconduct – There’s been a breach of policy, poor behaviour or ethical concerns. 
• Genuine operational change – The role is no longer needed due to restructuring or business changes. 

How probation works in practice: Scenarios for business 

Scenario 1: The contract states a 3-month probationary period  

You’ve offered a new employee a contract that includes a 3-month probation period. While that timeframe may serve as an internal checkpoint, it doesn’t override the minimum employment period.  

This means your employee is still within the 6 or 12 month minimum employment period and is not yet eligible to bring an unfair dismissal claim. You also don’t need to formally ‘extend’ their probation unless your internal processes or contract say otherwise. 

That said, it’s good practice to communicate this clearly with your employee. Transparency helps set expectations, builds trust, and avoid confusion.  

Scenario 2: What happens if your employee has taken unpaid leave during the probationary period? 

If your new employee takes 2 months of unpaid leave during their 6-month minimum employment period, this means they are only working in your business actively for 4 months. In this situation, given you may not have enough time to properly assess their performance, you’re able to extend their probation by the length of the unpaid leave taken, to ensure a fair evaluation period. 

In this scenario, you should formally notify the employee in writing that their probation is being extended, explain why and confirm the new end date. This keeps your process fair and compliant. 

Best practice tip: Add a probation extension clause to your contracts

To avoid grey areas or misunderstandings, it’s a smart move to include a probation clause in your contracts that: 

• Allows you as an employer to extend probation in specific circumstances (e.g. extended leave or incomplete assessment), 
• sets the maximum length aligned with the minimum employment period in the Fair Work Act, and 
• commits to discussing any extension with the employee and confirming it in writing. 

This approach gives everyone clarity, supports fair decision making, and reduces the potential risk further down the line. 

Probation periods, when managed effectively, can strengthen hiring decisions, uphold workplace standards, and give new employees a genuine opportunity to succeed. The key lies in setting clear expectations from the start, through well-drafted employment contracts, defined probation terms, and provisions for possible extensions. Aligning your internal practices with the Fair Work Act not only reduces legal risk but also fosters a transparent and fair workplace culture.  

Whether you’re managing underperformance, navigating extended leave, or simply approaching the end of a probation period, consistent communication and compliant documentation make all the difference. Including a probation extension clause in your contracts and staying across your obligations means you’re better equipped to make confident and defensible decisions. 

Our Workplace Advisory Services team supports employers in managing probation periods with confidence. We assist with:  

• Drafting or reviewing employment contracts and probation clauses 
• Preparing clear, legally compliant letters to employees regarding performance, extensions, or outcomes of probation 
• Advising on your obligations under the Fair Work Act and how to reduce legal risk