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An employers guide to trial periods.

What are trial periods?

Trial periods have been available to employers in New Zealand since 2009. They were originally introduced by the government to reduce the risk to business owners of hiring new staff. The introduction of trial periods coincided with the global financial crisis, and many New Zealand business owners used the trial period to take on new staff, knowing that if it didn’t work out in the first three months the employee could be moved on. Up until 2011, trial periods could only be utilised by employers with 19 or fewer staff. 

Now, any business can utilise them; and in our view, trial periods should be utilised!

Trial periods vs probation periods:

When trial periods were first introduced, there was a degree of confusion around the terms "trial period" and "probationary period", due to the interchangeable use of the two terms. Even today this confusion still exists, despite the courts and our legislation making it clear that trial periods and probationary periods are two different and distinct concepts.

One of the significant differences between a trial period and a probationary period is that if an employee is dismissed pursuant to a trial period, that employee cannot raise a personal grievance in respect of that dismissal. This prohibition is set out in the ERA. However, under a probationary period, there is no such statutory prohibition. This means that if the employer terminates the employee’s employment pursuant to the probationary period, the employer must still follow all procedural and substantive requirements to prevent the employee from raising a personal grievance in respect of the dismissal.

Also, if there are performance issues with the employee then, under the trial period, the employer may decide that the employee is not suitable and look to easily terminate the employee’s employment pursuant to the trial period. If the employee is under a probationary period, then the employer is bound to follow a proper procedural process and provide the employee with guidance, feedback, training and support in order to assist the employee with getting back on track. Only after the employee is provided with this type of support (and given a reasonable opportunity to “lift their socks up”) will the employer be able to look at terminating the employee’s employment, should the employee’s performance not improve. This process can be long and frustrating for employers.

Another difference is that under section 120 of the ERA, an employee who is dismissed during a probationary period is entitled to request a statement in writing as to the reasons for the dismissal. This entitlement is not available to employees who are dismissed pursuant to a trial period. However, it’s important to keep in mind that although the employer doesn’t have to provide reasons as to why the employee is being dismissed under the trial period, the employer must continue to act in good faith and be communicative and responsive to the employee. This means that if the employee asks what the reasons are, then the employer must respond.

If you would like to find out more information about trial periods or probationary periods then please contact our Commercial Law Team.

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