This article is based on the law of England and Wales.
Switching jobs can be nerve racking – especially if you’ve built up employment rights with your current employer. New jobs typically have a ‘probation period’ during which, failure could leave you jobless. However, what most employees don’t appreciate is that probation periods mean very little from a legal perspective.
To explain why, it will be helpful to first look at what your rights are when the employer doesn’t specify a probation period.
Notice – your rights
By law, unless your contract says otherwise, your employer only has to pay one week’s notice once you have worked for them for one month. If you have worked for the employer for less than a month (unless your contract says otherwise) there’s no such obligation – they can dismiss you with no notice at all.
Statutory notice is as follows:
- One week’s notice if you have been employed by the employer continuously for one month or more, but for less than two years
- Two weeks’ notice if you have been employed by the employer continuously for two years, and one additional week’s notice for each further complete year of continuous employment, up to a maximum of 12 weeks.
So, for example, if you have worked for 5 years then you are entitled to 5 weeks’ notice (see: Acas statutory notice)
Your employer can vary the minimum statutory notice in your contract, if they want to. This is very common. It is typical to see a clause stating that the notice period is “one month or statutory notice period, whichever is greater”, once the employee has passed probation.
This is well in excess of what is required by statute and there’s absolutely no obligation for the employer to provide it. However, it is to protect the employer from losing a satisfactory employee at short notice because this could affect the employer’s business operations.
Probation periods are usually contained in your employment contract.
A typical probation period clause in an employment contract looks like this:
“The first 4 weeks of the Appointment shall be a probationary period and the Appointment may be terminated during this period at any time on one week’s notice or payment in lieu of notice. During the probationary period the Employee’s performance and suitability for continued employment will be monitored.”
If your employment contract contained this clause, your employer can terminate your contract at any time during the probation period, giving one week’s notice (or pay in lieu of notice) with a few exceptions. Those exceptions are termination for a ‘protected characteristic’. A list of protected characteristics can be found here.
Note that this clause varies the statutory minimum. It gives you a week’s pay if the employer terminates your contract in the first month. An employer doesn’t have to offer this, so it’s better than the statutory minimum.
Sometimes, the right to extend the probation period is reserved:
“The Company may, at its discretion, extend the probationary period for up to a further 3 months.”
The above clause makes literally no difference at all to the statutory situation. If the employer dismisses you, they are only obliged to pay one week’s notice if you’ve worked for them for up to two years anyway. So the notice period / pay you’ll get is the same as the statutory minimum.
Why bother to set a probation period at all?
It can be good to have a defined time where both employer and employee knows that each is assessing the suitability of the other. Probationary periods can also help employees make a smooth transition into their new role and team they were appointed into, if designed properly. They’ll typically include training and the employee might not have the pressure of full targets just yet.
An employer may also use the probation period to impose other limitations. For example, employees may not be eligible to take part in the company bonus scheme, or enjoy other benefits that long term loyal employees have. However, note that the probation period cannot affect your statutory rights such as the right to be paid minimum wage and the right to holiday pay.
After the probation period
After the probation period, you will recall that employers must pay you at least statutory notice which is just one week in the first two years. It’s important to appreciate that the clock starts to run on the day you start work – NOT at the end of the probation period.
As noted above, very often employers increase the notice period once employees have passed probation. Notice periods work both ways and if they don’t alter the statutory rules, you only have to give them a week in the first two years if you want to leave. Very few businesses will be confident that they can recruit, train and replace a good employee in the space of just one week. For this reason you’re more likely to find a one month’s notice clause in your contract once you have passed probation.
The employer can still dismiss you for any reason with the exception of a protected characteristic, up until you have two years of employment (subject to giving either statutory notice or if you have a contract, whatever notice is specified in the contract). After that time, you have a right not to be unfairly dismissed. There are a range of reasons classed as ‘automatically unfair’ after two years of employment, which you can see here. Your dismissal may also be unfair if it is made shortly before the two year threshold – speak to an employment lawyer if this is the case.
If you commit ‘gross misconduct’ you can be dismissed summarily, without any notice. This applies at any stage of your employment, even if you have passed the two year threshold. In all other cases of misconduct, the employer still has to pay notice. Find out more about this at ACAS.
Protecting finances when changing jobs
The lack of employment rights in the first two years puts you in a vulnerable position financially. Before you make the switch, it’s important to take steps so that you won’t struggle financially if the new position doesn’t work out. These include:
- Be frugal: New jobs often bring a better rate of pay and it can be tempting to splash out when the first pay packet lands. However, you’ll sorely regret doing this if the job doesn’t work out later down the line. It pays to resist those urges and be frugal at first – adding any surplus income to your emergency fund (see below).
- Make a budget: If you’ve previously allowed everything to trickle in and out of your account without really keeping track, now is a good time to break out your spreadsheet skills. Use your bank statements to evaluate what you’ve spent over the past 3 months and create a budget sheet, cutting out any unnecessary spending. This will give you a good picture of how much your emergency fund needs to be. It will also help you maximise what can be put aside whilst your job future is uncertain.
- Have an emergency fund: Most experts advise that you put aside between three and six months of emergency funds. Obviously a bigger pot gives you more time to find a replacement job if needed. Cross reference your emergency fund with your budget so you know exactly how much breathing room you have if you lose the job.
- Refinance: Take a good look at your debts and try to reduce the amount you’re paying on interest. Where possible, spread the debt over a longer period with a 0% card. See Martin Lewis’ guide here. Smaller payments and less interest mean that if you do lose the new job, your emergency fund will stretch further.
- Evaluate your investments: Are your savings working as hard for you as they could? Are they each invested at an appropriate level of risk? MSE identifies the highest paying savings accounts here. You may also like to consider other types of investment to produce a better return. However, investments that are subject to risk may not be suitable for your emergency fund.
- Look at income protection insurance: Such policies either pay out for a fixed period of time or pay out if you lose your job. After taking out the policy, there’s usually a period where you won’t be able to claim (this is to stop people taking out policies when they know they’re going to lose their jobs). The insurer may also have other eligibility criteria so it’s important to check this carefully.