Common mistakes of businesses during the probation period

The probation period is a crucial stage that allows both employers and employees to evaluate their compatibility. For businesses, it serves as an opportunity to assess candidates’ abilities and adaptability to the job, while employees can determine whether the working environment and job meet their expectations and needs. Although probation is a temporary phase, businesses must comply with certain legal requirements concerning the duration and salary of the probation period. These regulations, while not as stringent as those governing formal employment contracts, set specific boundaries that businesses must adhere to. This article highlights some critical points businesses should be mindful of when conducting probation periods for employees.

Errors in requiring multiple probation periods

Amid economic fluctuations, many businesses face challenges in managing operational costs, leading employers to prioritize cost-cutting measures. One such tactic is imposing multiple probation periods on employees, often to avoid obligations and reduce wage expenses. Businesses may resort to this practice for various reasons, such as paying lower wages than the official rate or extending the evaluation period before formalizing the employment relationship[1]. According to Articles 25 and 26 of the Labor Code 2019, businesses must pay probation wages of no less than 85% of the official salary. The duration of probation depends on the nature and complexity of the job and, as a rule, employees may only undergo probation once for a specific position. After the probation period, employers are obligated to notify employees of the results, deciding whether to terminate the contract or formalize it by signing an employment contract[2].  Requiring employees to sign an addendum to the probation contract after the initial probation period ends is a legal violation, as it essentially constitutes repeated probation. This breach may result in administrative fines ranging from VND 4,000,000 to VND 10,000,000[3]. Therefore, businesses should be cautious about imposing multiple probation periods.

In cases where a company needs to rehire for a position previously held by an employee, and the same individual reapplies, businesses may legally require a new probationary period after the initial contract has ended. Current laws do not specify a minimum interval between two probation contracts. However, businesses should carefully consider the timing, especially if the new probation contract is proposed within 1-3 months after the initial one, to avoid being perceived as imposing repeated probation for the same job.

Mistakes in probation contracts requiring advance notice for termination

The execution of probation contracts can currently be carried out as a standalone probation agreement or as a specific clause within an employment contract. Regardless of the form, the essence of these two types of contracts differs, particularly in terms of the obligations of the parties within the labor relationship. In some cases, businesses have mistakenly conflated the notice obligation under an employment contract with that of a probation contract. For instance, some businesses require employees to comply with notice obligations before terminating a probation contract, as stated in provisions like: “Both parties agree that during the probation period, either party may unilaterally terminate the contract but must notify the other party in writing at least three working days prior to the intended termination date of the probation contract.” Such a requirement for notice during the probation period is contrary to legal regulations and reflects a misunderstanding on the part of the employer. While notice obligations are mandatory under employment contracts, they are not applicable to probation contracts. According to Clause 2, Article 27 of the Labor Code 2019, neither party is obligated to provide advance notice when terminating a probation contract. Therefore, any stipulation requiring advance notice in a probation contract is legally invalid.

On this basis, probation contracts containing provisions that violate the legal regulations regarding notice periods are non-compliant with current labor laws. Although there are currently no administrative penalties specifically prescribed for such violations, as previously mentioned, in the event of a dispute, a court may declare the notice provision in the probation contract null and void due to its contravention of Clause 2, Article 27 of the Labor Code 2019. To mitigate risks arising from non-compliance in probation contracts, businesses should thoroughly review all clauses to ensure their legality and alignment with current labor regulations. Developing and implementing clear probation contracts that comply with legal requirements not only protects the legitimate rights and interests of employees but also safeguards businesses from unnecessary legal risks.

Failure to notify probation results while continuing employment

After the conclusion of the probation period, some businesses fail to notify employees of their probation results but continue to engage them in work. Can this practice be interpreted as the business implicitly accepting the employee's probation performance and formalizing an employment contract? Such actions are considered non-compliant with current regulations, as the responsibility to inform employees of their probation results lies with the employer at the end of the probation period, as stipulated in Clause 1, Article 27 of the Labor Code 2019. Upon the conclusion of the probation period, two scenarios may arise:

First, if the parties have signed an employment contract containing probation terms and the employee meets the requirements, the employment contract continues to be valid. Conversely, if a standalone probation contract was signed, an employment contract must be executed following the employer’s notification of the probation results.

Second, if the employee fails to meet the requirements, the probation contract or the employment contract with probation terms is terminated after the employer notifies the employee of the results.

Failure to fulfill the obligation to notify employees of their probation results may subject the employer to administrative fines ranging from VND 1,000,000 to VND 2,000,000, as specified in Point b, Clause 1, Article 10, and Clause 1, Article 6 of Decree No. 12/2022/ND-CP.

Furthermore, businesses should note that in cases where no probation results are communicated, and no additional agreements are signed after the probation period ends, the labor relationship between the parties may be deemed established. Employees in such situations would be entitled to the benefits and protections stipulated for formal employment under the Labor Code 2019. Precedent No. 20/2018/AL illustrates this point: after a 60-day probation period, the plaintiff (Mr. T) and the defendant (Company L) agreed to extend the probation period, after which the company terminated the contract. However, Company L was not entitled to extend the probation period under Article 25 of the Labor Code 2019, as previously discussed. At the conclusion of the probation period, the labor relationship between Company L and Mr. T was considered established. Any termination of the employment relationship at that point would have required compliance with Article 36 of the Labor Code 2019, including fulfilling obligations related to social insurance, wages, and other statutory benefits. Businesses must exercise caution before concluding the probation period. Employers should base their decisions on the terms of the signed contract, collective labor agreements, and internal labor regulations to evaluate probation results and comply with notification requirements. Extending the probation period or implicitly establishing a labor relationship without proper formalization can lead to legal risks and liabilities.

The probation period plays a vital role in the recruitment process. It enables businesses to assess the competence and suitability of employees while allowing employees to evaluate the workplace environment. However, issues such as imposing multiple probation periods, misapplying notice requirements when terminating probation contracts, or failing to adequately notify probation results can create significant legal risks for businesses. To ensure the rights of both parties, businesses must carefully construct and implement probation contracts in compliance with labor laws. Understanding and adhering to these legal regulations not only safeguard employees’ rights but also help businesses maintain a fair, transparent working environment while avoiding unnecessary violations and disputes.