Trial periods in New Zealand allow small and medium-sized businesses to ‘trial’ new employees for a set period of time. This process allows businesses to see if the employees are suitable for the role. An employee can be dismissed without cause for up to 90 days after they begin work. Trial periods can be a useful tool, but there are strict rules on how businesses can use them. This article will set out how trial periods work and some of the associated rules and restrictions.

How Do Employment Trial Periods Work?

Trial periods take away a new employee’s ability to raise a personal grievance for unjustified dismissal. This is applicable only if they are dismissed within the designated time period of the trial (usually 90 days, which is the maximum allowed). 

Typically, to dismiss an employee, you would have to go through a poor performance or misconduct process. Trial periods allow you more flexibility when hiring. This is because you have the security of being able to dismiss an employee if they are a bad fit for the role without needing a time-consuming and expensive employment process.

If a new employee at your business is not performing well on their trial period, you can give notice to them that you are dismissing them using the trial period clause. You do not necessarily have to give reasons when you are dismissing the employee. Similarly, you do not have to give them an opportunity to respond, but it is best practice to do so. However, if the employee does ask why you are  dismissing them, you need to give a reason. 

If the new employee at your business performs well on their trial period, and you would like to keep them as an employee, there is nothing you need to do. At the end of the 90 days or the period of the trial, the trial ceases, and their employment continues. 

What Rights Do Employees on Trial Periods Have?

Employees on trial periods have the same set of employment rights and responsibilities as any other employees. The key exception is that they cannot bring a personal grievance for unjustified dismissal. You should  treat them the same as all other employees who are not on a trial period.

Note that even when an employee is on a trial period, they can still bring a personal grievance against your business on grounds other than about their dismissal. For instance, they would still be able to raise a claim about any:

  • discrimination;
  • sexual or racial harassment;
  • pressure about union membership; or
  • matter involving something the business does that unjustifiably disadvantages them.

What Would Make an Employment Trial Period Invalid?

If you want to use trial periods in your business when hiring new employees, it is essential to get the process right. If the trial period was not entered into legally, it will not be enforceable, and the employee would have the ability to raise a personal grievance if you dismissed them. Some things that would make a trial period invalid include:

  • if the trial period is not clearly set out in the employment agreement (this is the most common mistake made by employers); 
  • where the employee has not been expressly told they will be employed on a trial period before they start work. If an employee starts work before they have signed an employment contract agreement with a trial period, an employer cannot dismiss them on a trial period; and
  • where the employer dismisses an employee on a trial period without giving the proper amount of notice. If an employee has a notice period of a week in their agreement, an employer cannot immediately dismiss them. 

Who Can Use Employment Trial Periods?

Only small-to-medium-sized businesses and organisations are allowed to use employment trial periods in New Zealand. These are defined as employers of 19 employees or fewer. Bigger employers are not allowed to use trial periods but can use probationary periods instead. Previously, all employers were allowed to use trial periods, but that was changed a few years ago to tighten use to smaller employers.

You cannot use trial periods if offering a new role to a person who already works for your company.

Key Takeaways

Employment trial periods offer small and medium-sized businesses the opportunity to ‘trial’ new employees for a 90 day trial period. During this period, they can dismiss the employee without needing to go through a usual dismissal process like poor performance or misconduct. However, it is vital to ensure that the trial period is valid, clearly set out in the employment agreement and that you give reasonable notice when dismissing an employee on a trial. Larger businesses can use a probation period instead of a trial period. 

If you have any other questions using trial periods, contact LegalVision’s employment lawyers on 0800 005 570 or complete the form on this page.

FAQs

Can any employer use a trial period?

No. Only employers with 19 or fewer employees can use trial periods for new employees. For bigger employers, any trial period is automatically unenforceable.

How much notice do I have to give when dismissing an employee on a trial period?

It depends on the notice required in the employment agreement.You have to give at least the duration provided for in the agreement.

What rights employees on trial periods have?

Employees on trial periods have the same set of rights and responsibilities as any other employee. The only difference is that they cannot raise a claim for being dismissed if they are dismissed via a valid trial period clause.

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