A trial period allows employers to dismiss an employee for a period of up to 90 days from the commencement of their employment, without the employee being able to raise a personal grievance for unjustified dismissal.
Currently, trial periods are limited to employers with less than 20 employees. The new government has now announced that they are going to expand trial periods to include businesses with 20 or more employees. We anticipate that trial periods will still only apply to new employees, given this was the position when National first introduced the scheme in 2009.
In an economy where our unemployment rates are seemingly high, the shift incentivises employers of larger businesses to take more risks when hiring. Equally, there is a risk that it could increase job instability as ultimately, it encompasses less restraints surrounding dismissal. Trial periods can be constructive for both employers, and employees, if they are used effectively. If employers use the time to provide constructive feedback, and communicate about any issues early on, then this gives employees the time to improve, adapt and upskill.
Employers must be cautious that employees do not carry out any work before they have signed their employment agreement, that the trial period is explicit in the agreement, and that agreement has a valid notice period. Otherwise, the trial period will not be valid and employees may be able to raise a personal grievance over their termination. Having these obligations on employers means that employees are aware of a trial period, before they sign an employment agreement.
