In our last Newsletter we covered the imminent changes to employment law flagged by the incoming Government.
One of the most significant of these was the extension of the 90 trial period to all businesses, not just those with fewer than 20 employees. It will be interesting to see if this change will have any impact on employment rates, particularly given the technical recession in New Zealand as recently announced.
Whether acting on behalf of employers or employees we are often asked about the differences between trial and probationary periods of employment, and their respective advantages and disadvantages.
Generally, both trial periods and probationary periods serve as introductory phases for new employees, yet they differ significantly in their scope, legal implications, and benefits.
Trial periods, which can be for any period up to but not extending beyond 90 days, can only be used for new employees, and never for existing employees in a new role. To be effective, the trial period must be included in the terms of the employment agreement and signed off by the employee before work commences.
Trial periods allow employers to assess the suitability of a new employee for the role. During this period, the employment agreement can be terminated without the need for a specific reason, although the employer still has responsibilities under employment law including abiding by non-harassment and non-discrimination laws.
This flexibility allows employers to quickly address mismatches in skills or culture fit and may give confidence to “give someone a go”. From the employee’s perspective downsides could include vulnerability to sudden dismissal without recourse, potentially leading to job insecurity and anxiety. Further, the uncertainty may discourage candidates from taking risks or re-locating.
Employers need to be very careful, however, in using trial periods to ensure they understand the procedures involved in ending the employment. For example, notice must be given before the trial ends, or the employment may inadvertently become permanent.
Probationary periods on the other hand are more structured and typically last longer, often ranging from three to six months.
Unlike trial periods, probationary periods require employers to provide valid reasons for termination. Therefore there is a greater degree of protection, including the potential to raise a personal grievance in the case of unjustified dismissal.
Probationary periods provide a longer window for employees to get used to the role, receive feedback, and improve performance. This can mean an employer will need to invest more time and effort as there is an obligation to provide support and guidance to probationary employees, investing in their development even if the outcome is unclear.
Conclusion
Trial and probationary periods can serve useful functions. Trial periods offer employers flexibility and the ability to swiftly address mismatches but do entail risks around the employee’s concerns for job security. On the other hand, probationary periods prioritise fairness and due process, providing employees with protection against unjustified dismissal. They usually mean a greater administrative burden on and resource commitment for employers. Ultimately, the choice between trial and probationary periods often comes down to a business’s priorities, risk tolerance, and commitment to fostering a supportive and equitable work environment. Beware though employers. Whichever route you go down there are fishhooks. Processes and procedures need to be understood and followed to take advantage of these flexible business tools.
