Probationary periods are commonly adopted by employers in Taiwan. The purpose of a probationary period is for employers and employees to assess each other’s suitability. During a probationary period, both parties (employer and employee) may unilaterally terminate the employment agreement at any time. While there is no statutory provision for probationary periods in Taiwan’s employment-related laws, courts generally acknowledge the validity of probationary periods agreed upon by both employers and employees. This article, based on current court decisions, outlines three key legal points regarding probationary periods that startups should consider when implementing them.
Specify Probationary Periods in the Terms of an Employment Agreement
If a company decides to implement a probationary period for its employees, it should clearly stipulate the probationary period clause in the employment agreement. This includes the duration of the probationary period, whether it can be extended and how many times, and the consequences of unsatisfactory performance or unsuitability during or upon completion of the probationary period.
How long should a probationary period be? While probationary periods typically range from three to six months, courts have held that companies can determine the duration of a probationary period depending on the reasonableness and necessity of a specific job, such as the nature of the position, the skills required, the seniority of the position, and whether a job applicant has sufficient time to make the decision.
Establish Performance Evaluation Regulations
Companies that implement probationary periods should establish clear performance goals (e.g., KPIs) and evaluation criteria, which should be communicated to employees. Regular performance evaluations, such as monthly reviews, should also be conducted in probationary periods. Failing to establish clear evaluation criteria, neglecting to conduct regular evaluations, or failing to keep relevant records can increase the risk of labor disputes. While courts generally adopt a more lenient approach to termination during probationary periods, they still require employers to base their decisions on “reasonable, concrete, and objective assessments based on specific facts” and avoid any “abuse of power.” Regular performance evaluations and documentation can help clarify key facts and support the employer’s assessment.
Furthermore, it is recommended that employers complete the performance evaluation and notify employees of the outcome before the end of the probationary period. This helps prevent situations where an unsuitable employee on probation becomes a permanent employee and then claims that the employer terminates the employment agreement without the statutory grounds stipulated the Labor Standards Act, potentially leading to labor disputes.
Pay up Severance Even During Probationary Periods
Even if an employer decides to terminate an employee’s employment during or upon completion of the probationary period, they are still obligated to comply with the severance provisions of the Labor Standards Act. Additionally, employers should pay attention to the following administrative procedures that are often overlooked in practice:
- Employers must notify the local competent authority of the layoff 10 days before the employee’s last day of work.
- If the probationary period exceeds three months, and the employer intends to lay off a probationary employee who has been employed for more than three months during or upon completion of the probationary period, they must still provide advance notice or severance in lieu of notice.
Our Advice to Startups
While courts recognize the validity of probationary periods and adopt a more lenient approach to termination during probationary periods, employers should still pay attention to the three points outlined above and ensure compliance. If you have any doubts, it is advisable to consult with a professional attorney to minimize the risk of labor disputes.