In most private limited companies, new employees are not immediately confirmed upon joining. Rather, they are usually placed on a probation period where they undertake a trial for both parties. In this case, a trial for the company to observe the employee’s skills, attitude and fitting in with their culture and for the employee to evaluate whether they are happy in the working environment and can build on the expectations placed upon them.
This blog explains what a probation period is, the legal framework governing it in India, typical rules followed by Pvt Ltd companies, the rights of employees, and best practices for both employers and employees.
Introduction
A probation period is a preliminary stage of employment where the employee works under observation before being confirmed as a permanent staff member. It is not mandatory under Indian labour laws, but is widely adopted as a standard HR practice.
Typically, the length of probation is determined by the employment contract, individual company policies, and the applicable labor laws, like the Shops and Establishments Act, or the Industrial Employment (Standing Orders) Act, 1946.
Probation policies for private limited companies give them flexibility, allowing them to “try out” employees’ performances before signing a permanent employment contract.
What is a Probation Period?
- A probation period is a defined timeframe during which a new hire works on a trial basis.
- It generally ranges from 3 months to 6 months, though some companies extend it up to 1 year.
- During this period, employment is more flexible, and termination or confirmation can happen with shorter notice.
Once the probation period ends successfully, the employee is usually given a confirmation letter, making them a permanent employee with all associated benefits.
Legal Basis in India
There is no single central law outlining the conditions of probation in private companies, but it operates under the authority of:
- Employment Contract/ Appointment Letter – Most companies are quite clear with their probation clauses in employment contracts and appointment letters that should cover the length of probation, extension and confirmation.
- Shops and Establishments Act (State-specific) – Many states have notice periods, working hours during the probation and termination by the employer.
- Industrial Employment (Standing Orders) Act, 1946 – This would apply if there are more than 100 employees, model standing orders state that probation should not normally exceed 3 months (however employers can have a certified standing order).
Therefore, the conditions in Pvt Ltd companies depend predominantly on company policy, provided they are not contrary to labour laws.
Probation Period Rules for Pvt Ltd Companies
1. Duration of Probation
- Commonly 3–6 months.
- Some companies keep it for 1 year, especially for critical roles.
- It must be specified in the appointment letter.
2. Extension of Probation
- If performance is not satisfactory, companies may extend probation.
- Extension must be communicated in writing.
- Employees cannot be kept on indefinite probation — prolonged probation can be challenged in court.
3. Probationary Termination
- Termination is evidently less complicated during the probationary period than during confirmed employment.
- Generally, the employee is only required to provide a shorter notice period (e.g. 1 week to 1 month).
- However, termination should not be discriminatory and must be followed according to the contract and law.
4. Confirmation of Employment
- After successful completion of probation, companies have a requirement to issue a letter of confirmation.
- Upon confirmation, the employee will be entitled to receive full benefits (gratuity eligibility, PF continuation, medical insurance, etc.).
5. Rights of Probationary Employees
Even during probation, employees are entitled to:
- Minimum wages
- Statutory benefits like PF, ESI (if applicable)
- Leave under the Shops & Establishments Act
However, benefits like gratuity or enhanced job security apply only after confirmation.
Rights and Obligations of Employees on Probation
Rights
- Right to wages as per law and contract
- Right to safe working conditions
- Entitlement to statutory benefits (PF, ESI, maternity benefits, etc.)
- Protection against unfair dismissal (although the scope is narrower than for a confirmed employee).
Obligations
- Demonstrate competence and reliability
- Follow company policies and code of conduct
- Accept feedback and improve performance
Best Practices for Pvt Ltd Companies
For Employers
- Clearly define probation rules in appointment letters.
- Conduct regular performance reviews during probation.
- Communicate feedback and expectations transparently.
- Issue timely confirmation or extension letters.
- Avoid keeping employees on perpetual probation, as it can be considered an unfair labour practice.
For Employees
- Take probation seriously. Performance here sets the tone for confirmation.
- Seek regular feedback to understand expectations.
- Clarify the terms of probation (notice period, benefits) at the time of joining.
- Maintain professionalism as termination risk is higher in this phase.
Case Laws and Judicial Interpretation
Indian courts have held that:
- An employee cannot be kept on probation indefinitely if probation is extended unreasonably; they may be deemed confirmed.
- Termination during probation must not be arbitrary, discriminatory, or against principles of natural justice.
For example, in Dharwad District PWD Literate Daily Wage Employees’ Association vs State of Karnataka (1990), the Supreme Court emphasized fair treatment of probationers.
Conclusion
The probationary period in Pvt Ltd companies is a pivotal phase in assessing mutual compatibility between employer and employee. Although the law in India does not stipulate a probationary period, companies typically have a 3 -6 month probation policy, extendable if necessary. Probationers have basic statutory rights but less security of tenure until confirmation.
When an employer has set expectations through transparent policies on probation, they will have fewer disputes, as well as a better quality of staff. Likewise, if an employee has performed well during their probation period, it opens the doors for all parties to begin the process of stability and growth in the organization. In conclusion, probation should not be viewed as a formality, but rather framed or set as a process that will set the stage for a sustainable employment relationship.
References
The Companies Act, 2013 (Act No. 18 of 2013)
https://www.mca.gov.in/
https://www.icsi.edu/home/
