Probation periods are almost entirely a contractual matter between you and the employee. Therefore the rules around extending or confirming are largely down to your rules and any contractual provisions (and the wording of the contract may well be relevant)

Are you going to tell them why you are extending the probation period? And if so how do you expect them to react to the news their employer is in financial difficulty?

Under your contracts is it clear that the confirmation of probation period goes with an increase in notice periods and (if so)  can you change that (by agreement if necessary)

BTW don't expect employees to see the shorter notice period they give you as a benefit. They will however see the losing of a longer notice period from you as a potentially big loss.

In reply to Keith:

Hi Keith,

Thank you for responding so quickly.

Our contract states that we can extend an employees probation to assess job performance and suitability, but it doesn't go into detail about extending for any other reason.

It is our Director who has made this suggestion (we are still a small company with no senior HR professional) and I am not sure if he intends to tell them that we are extending due to the funding search.

My concerns are two-fold, firstly, if we extend employees and state we are assessing job performance when the real reason is hidden, this is unethical and secondly, as you stated, if we do tell them this could cause concern and we could risk them seeking a new role.

I assume then there is no legal issue with extending an employees probation for this reason, however, if we do not tell them about the reason why this could cause issues?

In reply to Charlotte:

Charlotte 

Your contract doesn't really give you the right to extend for this reason. The question is what the employee could do about it, By extending they will believe there is a problem with their performance - is this fair, reasonable etc? Clearly not. Its also potentially a breach of contract (especially if you are using it to deny a contractual benefit that they otherwise would have received).

I see no real alternative (to be legal and decent) but to either confirm probation in line with each individuals performance and take any hit on notice pay (and / or seek to mitigate by negotiation) or to be honest and open with people about what is happening.

If you extend probation you would "probably" get away with it but at risk of hugely demotivating anyone extended and forcing your managers to have some awkward conversations - "I am extending your probation because....."

Hi Charlotte

If the company does run out of money, then so what?
- usually, rules of insolvency would apply and ultimately former employees might have a claim for unpaid notice etc on Govt. fund.

- absolutely no justification for making new employees indirectly subsidize the company IMHO - deplorable idea, for which they should be ashamed!

In reply to Keith:

Thank you for your reply, Keith, I completely agree with everything you have said, and it was my initial feeling about the situation.

When researching the issue online there is relatively little information regarding extending due to company funding issues, so I am glad I posted on here, this will help when I go back to our Director to address the issue.

Thanks again.

In reply to David:

Hi David,
I completely agree with your feedback, I am glad I have posted on here regarding this matter as it will help when I go back to our Director to address the matter and to ensure we are open and honest with our employees.
Thanks,
Charlotte