Firms must understand impact of removing probationary periods for new starters - finance expert

A leading financial advisor claims proposals to abolish Probationary Periods for new appointments will hinder business expansion and economic growth.

Mike Jordan (pictured), who founded Jordan Financial Management in Sutton Coldfield more than 25 years ago, believes measures included in the Labour Party’s ‘New Deal for Workers’ will make it riskier and more expensive for businesses to recruit.

He said: “I understand that the motivation behind the proposals to do away with Probationary Periods for new starters is to provide immediate job security and benefits for workers, but there will obviously be a knock-on effect on businesses, as well as the broader economy.

“We have to ask the question are businesses really aware of the ramifications. For a start, employers use probationary periods to assess a new employee's performance, work ethic, and how they fit in without the full commitment of long-term employment. It’s an important buffer for firms.

“Then there’s the financial implications, because granting full employment rights from day one gives staff entitlement to paid leave and sick pay – some small businesses may not be prepared for this. I have contacts who work for European businesses, where these rules already exist and they’ve had new employees go sick on their first day and it’s then taken over six months to dismiss them - with them never having worked a day.

“But perhaps most importantly, it would remove a really important function that allows businesses to address performance issues, or act when an employee simply isn’t suited to the job they have started.

“It’s not possible to get to know someone fully at the interview stage, it’s only when working together that you find out whether the employee is what you were expecting. Currently an employer has the ability to end the employment during the probationary period. 

“Having spoken to other business owners, they’ve all said that, if this buffer is removed it could have a chilling effect on the jobs market, because business will be more reticent to appoint people and this is going to impact economic growth.”

Mike is no stranger to the challenges of recruitment, developing an in-house training programme which has recruited new staff in recent years and then moulded them to absorb the unique, personal culture of the business.

His company has doubled in size and hopes to continue this growth, offering great careers and opportunities in financial services.

Mike said: “Our sector is all about investment and we have found that investing in our people has had very tangible positive returns.

“However, recruitment is about making sure you have the right people to fill the roles you create, and a Probationary Period can be incredibly useful in getting that right.”

The Labour Party says the New Deal for Workers will make work pay, boosting wages, making work more secure and supporting working people to thrive – delivering a genuine living wage, banning exploitative zero-hour contracts, and ending fire and rehire. 

Mike said: “While the ambitions of the proposals may be laudable for workers, as an employer I’m concerned as to how some businesses will cope with sudden changes, particularly as there is a stated intention to bring legislation within 100 days of taking office.

“There needs to be a balance between how employment laws work for businesses and employees. The probationary period is an essential part of that balance.”