How Should We Handle Extending Probation with Reduced Responsibilities and Salary?

Dear Seniors, One of our employees was on probation and completed his probation period on 27th July 2014. As his performance is not satisfactory and he is not able to handle all the responsibilities, management has decided to extend his probation period for three months, reduce his responsibilities, and simultaneously decrease his salary. I kindly request your input on issuing the extension letter with the above conditions. Thanks in advance.

Regards, M. Khan

In the realm of employment, the period of probation is the timespan within which the employee, whether a fresher to the organization or a promotee from a lower post in the same organization, has to prove that he possesses the minimum capabilities to perform the job to the satisfaction of the employer and to shoulder eventual higher responsibilities that may arise in the job. If it happens otherwise on any score or both, it is within the discretion and prerogative of the management to either discharge him simpliciter or extend his probation period to enable him to catch up as per the terms of the employment contract. However, reducing his salary? Unheard of! I believe stipulating a new condition in the same employment contract is not permissible.

It does make sense actually. Obviously, the employee was unfit for the post. So they are now giving him a chance to work for a lower post and, of course, the salary would be lower.

To the best of my knowledge, there is no law that says a salary cannot be reduced or renegotiated. However, it is important that the same is made very clear and the employee accepts it.

Alternatively, you can terminate him as his performance does not match the job. Here, he gets a chance to prove himself. If the employee does not want to work in the new job or for the new salary, he can always resign and leave. Since you have changed the terms of employment and he has not accepted them, he can leave without notice.

Dear Saswata Banerjee, I think your response takes the discussion to a different line regarding the subsequent reappointment to a lower post, which befits the individual's lesser capability due to poor performance in the job for which he was originally appointed on probation. Whether the employee accepts the fresh offer made in the same contract and continues or leaves by resigning immediately is not the subject of discussion.

Core Question

The gist of the question posed is whether such a modification to the disadvantage of the employee can be made unilaterally by the employer in the same contract of employment covering a single transaction of appointment on a probation basis. In case his performance in the lower post during the extended period of probation also falls below the expectations of the employer, will the process be repeated just because the employee accepts out of necessity?

Legal Considerations in Salary Reduction

Let's stick to the legal part first. I do not know of any provision that says an employer cannot reduce salary (except for a limited purpose in the PF Act). Salary is always a matter to be discussed and negotiated between the employer and the employee (subject, of course, to minimum wages notified).

So, any decrease also needs to be accepted by the employee. To that extent, there is no concept of unilateral reduction. In each case, the employee has to agree. If the employee does not agree, he can either resign and go somewhere else or raise an industrial dispute.

In the current case, being during probation, the employee cannot raise an industrial dispute. The terms of employment already provide the option to terminate without notice or assign a reason. So, if the employee accepts the reduction, he has accepted the new terms of employment. If he doesn't, he can leave. The parameters of the matter would be different if the employee were a permanent employee.

I hope you agree with my contention. If I have missed some point or provision of law, I would be happy to be updated.

Handling Underperformance During Probation

On the last part, I think if he fails to fulfill the lower expectation, the company should terminate him. It would make little sense to go another step lower. I think what the company did in this case was an exception, but a humane approach of giving a chance at a level they think he can handle instead of putting him out of a job.

I remember a similar case that was on the forum a year back. There was a young HR graduate who had joined a software company as HR. Based on her previous 6-month work experience, the company employed her, convinced by her statements during the interview that she knew everything related to HR and compliance. When it came to confirmation, they refused to give her the agreed salary as they found she knew very little. They offered her a lower salary and hired a consultant to ensure things were properly done. I guess they were aware that if they terminated and hired afresh, they would lose another 3 months without being sure the next one would be any better.

I remember the post asking whether she could take legal action (for offering a lower salary) without realizing or considering that instead, they could simply terminate her as she was still in probation. I don’t remember what the conclusion was from all the posts we had.

Thank you for your inputs. The management, after discussion, has decided to extend his probation period for two months and assign him new responsibilities in the same category without reducing his salary. It was also decided that he would be terminated if he could not perform in the new role. We have also changed his reporting boss.

Thanks and regards,
M. Khan

Khan's reply has given a happy end to the issue he raised. Not because it is in tune with my viewpoint, but it makes the decision of the management a perfect one, enhancing its image in the eyes of employees on probation. The period of probation, as it is, is an acid test for any new employee, whether they are a fresher or an experienced candidate. In my opinion, it will be more stressful for a fresher as they have to learn the practical applications of what they studied in theory and understand the psychology of the work environment as well. In the other case, too, lots of mental adjustments, whether willingly made or not, have to be done by the probationer due to possible differences in work style and work culture. So, a lapse in one way or the other is inevitable. Since evaluation is a process based mostly on subjective considerations of the authority concerned, errors in judgment are always possible. That's how the clause permitting the extension of the period of probation came to be in place.

Placing the underperforming probationer in a lower job for which they were not selected, especially on reduced salary, not only nullifies the original appointment but also amounts to demotion, which is equivalent to punishment and a poor HR practice. Here, the elements of humane consideration or the meek acceptance of the poor employee are out of context, as the management's actions can be considered not only a breach of contract but also an act of impropriety. Returning to Banerjee's presumptions, it is true that no law explicitly prohibits a general reduction in the salaries of employees. However, the reason for the reduction and the willing agreement of the employees matter significantly. In times of adversity beyond correction, as one of the measures of austerity to save the industry, a general reduction of salaries for all employees with their consent is a universally accepted method of rehabilitation. This cannot be applied to an individual case of an inefficient employee on probation, as it could be construed as an unfair HR practice of selecting the candidate for a higher post but confirming them in a lower one based on the subjective presumption of their unsuitability for the initial job appointment.

I am not disputing your points. However, I take a message/lesson from this that if you find an employee selected is unfit for the job he was originally chosen for (or has applied for), then he should be terminated at the end of the probation. The employer should not give him a chance to work at a position that requires lower skill and therefore within his aptitude but carries a lower salary. He may be ineligible, as per company policy, to reapply after having been terminated at the end of the probation. I know this, in any case, is a rare event. But considering a hypothetical case, is my understanding correct? (No employer will bother to give a lower job at the same scale as he got before just because he applied for a job he was incapable of doing.)

In fact, the case cited revealed that his probation was extended but to a lower post with lower pay. This leads to punishment without offering an opportunity to the employee. The fact is that a person has applied for a particular post with a specific salary, and he was appointed to that position. Later, it is at the employer's discretion to keep him in that post or not. However, the employer has no right to reduce his salary under the guise of poor performance while extending the probation. This would lead to unfair labor practices. I agree with the views expressed by Mr. Umakanthan.M.

Thanks,

V K Gupta

We have faced a few such cases. We have adopted both options:

i) Extending the probation period when we found a fresher did not perform satisfactorily for the post he/she was selected for, without any increase like an increment.

ii) In the second case, we did not extend the probation but renegotiated with the concerned individual and fixed him in a lower post with his consent, as he was wanting that post. Otherwise, he would have been terminated within his probation period. This was done with a view to help him retain employment. Any unwilling employee could always be sent off for underperformance or non-performance, and even on moral grounds like misbehavior, etc.

I don't find any unfair labor practice in adopting these methods; otherwise, the very purpose of the 'probation period' would be defeated. I don't advocate the concept of retaining an employee whether he performs or not.

I think I understand the point that Mr. Gupta and Umakantha are making. I, like you, think it is better for the employee to be retained at a lower job instead of being out of a job. This is more true for freshers, but also applies to experienced individuals who would find it difficult to survive until they get a job elsewhere and explain the gap of 3-6 months. However, it is quite possible that at a later date, the employee may claim that this was an unfair labor practice, that he was forced to accept lower wages than promised, etc. To avoid that problem, it makes sense to terminate him. Inhuman as it may sound, it's better (safer) for the company.

I am sure your country has laws regarding labor issues as well as your company policies. What I think should have been done was that the employee should have been given a probationary salary (which should be different from what the employee will receive when the employee successfully completes the probationary period), so that in the situation where the employee is unable to meet the task and perform satisfactorily during the period, you extend the probation period. Should it be the case that during the extended period, there is no improvement in the performance of the employee, you take out some of the responsibilities of the employee. When the extended period is over, and the performance is still the same, you let the person go. This is just a matter of applying the laid-down procedures.

For instance, the salary for a confirmed staff after probation will be $600, and during probation, it will be $450. Should the employee demonstrate the inability to handle the task during the probationary period, the employee stays at the probationary salary until after the extended probation period.

I wish you all the best in dealing with the situation.

Regards, Dennis

I am sure your country has laws regarding labor issues as well as your company policies. What I think should have been done is that the employee should have been given a probationary salary, which should be different from what the employee will receive when the employee successfully completes the probationary period. This way, in a situation where the employee is unable to meet the task and perform satisfactorily during the period, you can extend the probation period. If during the extended period there is no improvement in the performance of the employee, you can remove some of the employee's responsibilities. Then, when the extended period is over and the performance remains the same, you can let the person go. This is just a matter of applying the laid-down procedures.

For instance, the salary for a confirmed staff after probation will be $600, and during probation, it will be $450. If the employee demonstrates an inability to handle the task during the probationary period, the employee stays at the probationary salary until after the extended probation period.

I wish you all the best in dealing with the situation.

Regards, Dennis

Partly, you are correct in understanding the point of view of Mr. Umakanthan. Since you are already in the profession, you must have heard the maxim of the lion and lamb relationship, which applies if the recourse you advocated was followed, leading to unethical and unfair management practices.

Management Recourse Options

The management could take recourse to the following:

- Ensure that during the period of probation, the management has made, on record, reasonable efforts to indicate the employee's deficiencies in his performance and guide him to improve.

- Having done so, if the management does not find satisfactory improvement in performance, it can terminate the probation. In the same vein, it can offer another job of a lower level, subject to the express acceptance of the same by the employee unconditionally.

- In the case of offering the lower job, accepted by the employee, the condition of probation has to be waived off, as the offer of the lower post has been made based on the performance standard of the employee duly adjudged by the management.

If the management is keen to offer a lower post with probation, it needs to terminate the probation of the substantive post and offer the other one on humanitarian grounds with the probation clause.

However, there cannot be a mix of both.

Thanks and regards,

S.K. Johri

Extending a Probation Period

Extending a probation period for an employee is a common practice, and the company has the right to do so. Adjusting the salary or demoting an employee is a decision that should be taken after explaining the situation to the employee.

It is important to understand that any employee, whether new or from another company cultural background, needs to be given a 'break-in' period to adjust to the new company culture. His or her 'performance reporting' channels must also be monitored and scrutinized for any bias or undue influence from peers or superiors, including any gender discrimination.

Once satisfied with these factors, making a decision becomes easier.

Regards,
Dilip Kumar Pillai