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Ever wish you could rent employees for a few months, take them for a test drive and then return them — no questions asked — if things don’t work out as hoped? That’s the strategy behind probationary periods for new hires.

“Employers may find the use of probationary periods useful in overall staffing decisions,” says Marta Moakley, legal editor for XPertHR USA in New Providence, N.J. Her company is an online service that helps employers comply with federal, state and municipal law.

“A probationary period allows an employer and an employee to enter into an employment arrangement in an effort to learn whether the relationship would be a good fit for all involved,” she says. “For the employer, the arrangement allows for a structured performance- management system that has a built-in timeline for employment decisions.”

Probationary periods have long been used in both the public and private sectors, although terminology may vary.

“Most employers do not use the words ‘probationary period’; we use the term `introductory period’,” says Rick Rossignol, principal of RTR Consulting Inc. in Ventura, Calif.

“We do not want anyone to think there is an implied contract of employment if they get past 90 days.”

Thinking win-win

Probationary periods are nothing new and remain fairly standard practice for many public sector employers.

“Probationary periods are very common in civil service positions and can be instituted in conjunction with collective-bargaining agreements,” Moakley says. “A probationary period may allow for streamlined terminations that do not require due process procedures.”

These periods also can be helpful for employees.

“If working in a labor or government environment … the payoff can mean increased job security and availability of a clearer career path for an employee,” she says. “If done well, the practice can have a very positive impact on employee retention and overall productivity.”

A well-structured probationary period sets up a win-win outcome.

“The employee and employer can test whether the relationship meets their needs,” Moakley says. “Probationary periods can be excellent tools for determining an employee’s cultural fit in the workplace.”

Rossignol agrees. “It gives management staff a chance to evaluate the employee and see if they are going to fit the company culture and be productive.”

Probationary periods can be especially beneficial for startups or small businesses, which have fewer resources to compensate for a bad hiring decision. Personnel costs are among the most expensive elements of business operations, and this cost becomes multiplied if an unproductive worker is on the team. Probationary periods give small-business owners a higher likelihood of securing and retaining quality employees — and the ability to cut ties with substandard employees without legal penalty.

Alternative approaches

Some businesses have faith in their ability to hire and develop the right employees without relying on probationary periods. Others modify the process to fit their needs.                       

“We don’t use formal probation periods,” says Kate Steward, vice president of Henry Wurst Inc., a marketing communications business in Kansas City, Mo. “We do have a `check-in’ with all new employees at the 90-day mark to assess fit, determine any additional training needs and solicit feedback on the onboarding and orientation process.”

Steward believes formal probations can create the wrong impression.

“I believe it sends the message that we are just not sure about the employee and that they have a hill to climb during the first 90 days to gain acceptance,” she says. “We like the idea of a dialogue at 90 days to determine how settled the employee is, what challenges they might have and any advice they can offer regarding onboarding for future employees.”

Other options are available.

“In the current economy, many private employers are choosing a temp-to-perm arrangement using an outside employment agency rather than implementing formal probationary periods for employees,” Moakley says. “However, there may be increased hiring competition for particularly high-performing workers. In addition, although the worker may be an excellent fit for the organization, the employee and the employer may have different goals: The worker may choose more flexibility and a less formal arrangement, while an employer may need to fill a full-time permanent position.”

Legal implications

Companies implementing probations need to be aware of potential legal landmines.

“You do not want to create an implied contract or imply that the employee can only be terminated for cause,” Rossignol says.

If an employer reneges on a promise to grant rights and benefits to a new hire as a reward for successfully completing a probationary period, the employer may be held liable. Such a promise may be explicit or implied; for example, many states consider policy manuals to be enforceable, implied contracts between employers and employees.

“For at-will employers, a probationary period could result in an unintended employment contract,” Moakley says. “For example, if the employer makes any assurances of continued employment once a probationary period is successfully completed, there is a possibility that the employment relationship has changed from that of at-will to that of contract.”

She offers a checklist of do’s and don’ts for operating a successful probation program:

  • Do adopt, distribute and implement a policy regarding probationary periods before interviewing or hiring any probationary employees.
  • Don’t implement a vague policy. Include specifics about the timing of the period, the employer’s performance expectations and whether any extensions to the period would be allowed.
  • Do include an at-will disclaimer in order to preserve that type of employment relationship.
  • Don’t ignore warning signs of a potentially unsuccessful relationship – use the probationary period to make the best staffing decisions possible
  • Do provide frequent feedback to probationary employees

How reliable are the results of probationary periods? Most experts agree that new employees who perform poorly during probationary periods seldom improve their performance significantly after the trial period has ended. However, each business owner has to decide for him or herself whether the employee’s performance during the trial period warrants continued employment

Probationary benefits may not be for everyone, but if properly designed and implemented, they can go a long way toward reducing buyer’s remorse.