90 Day Trial Periods – Help or Hindrance?
Trial periods on face value sound like a fantastic way for small businesses to hire with confidence, knowing that if the shoe doesn’t fit, it can be returned to the shop (minus the money back guarantee). However, is all as good as it seems? Do trial periods actually achieve any practical advantage or change, or do they in fact make it harder for employers in the long run?
The trial period legislation became effective on 1 March 2009 and allows employers with less than 20 employees to enter into an arrangement where they can terminate the employment of staff during the first 90 days of their employment without risk of a personal grievance for unfair dismissal.
However, how effective will the new law be when you consider the costs of recruitment, the effect of high staff turnover on staff morale, and the fact that recognition of poor performance can take time to develop? It is also worth considering the fact that once the 90 days has passed without termination, the ability to terminate without risk may have got harder.
Good recruitment, effective employee induction, communication and training are the key to successful and productive employment relationships. The law is never the solution to the problem and employers will have to think carefully about the usefulness of trial periods to their particular interests and needs. Change just because it is there may not be the best theory.
Summary of the law:
Trial periods are not automatic. They must be agreed to in good faith and be in writing. An example of such a clause is:
1.1. The parties agree in good faith that a trial period, pursuant to s67A of the Employment Relations Act 2000, will apply to [insert name of employee]’s employment for a period of [insert a period not exceeding 90 calendar days], to assess and confirm suitability for the position.
1.2. The employer will keep the employee informed of his/her progress during the trial period.
1.3. During the trial period the employer may terminate the employment relationship by giving notice before the expiry of the trial period.
1.4. Where the employer terminates the employment relationship under this clause, it will give [insert number of weeks] weeks notice. The employer may choose to pay salary in lieu of notice for all or part of the notice period.
1.5. The employee may not bring a personal grievance or other legal proceedings in respect of a dismissal made under this clause. However nothing in this clause prevents an employee from bringing a personal grievance or legal proceedings on any of the grounds specified in section 103(1)(b) to (g) of the Employment Relations Act 2000.
1.6. In all other respects (including access to mediation services), the employee is to be treated no differently from an employee whose employment agreement contains no trial provision or contains a trial provision that has ceased to have effect.
- To take advantage of the new law the employer must have less than 20 staff at the time the relevant employee was employed. The number count of 19 employees is taken at the beginning of the day on which the relevant employee was employed.
- The trial period can be for a maximum of 90 days, but can be for less time, if agreed.
- The trial is a one off and cannot be extended.
- Trial period can only be entered into once with the same employer.
- Termination must be within the 90 day period, however the notice period can extend beyond it. Any new notices issued outside the 90 days but inside the notice period will not be covered and will be capable of challenge.
- The employer’s obligations of good faith and to act fairly and reasonably remain and could be subject to challenge.
- The law change does not do away with other employee protection measures, such as the minimum wage entitlement, unlawful dismissal, etc.
The intention of the new law is to allow employers to assess the suitability for permanent employment without the risk of legal proceedings for unjustifiable dismissal.
If there is an effective trial period in place then an employer can terminate on notice within the trial period, and, as long as the notice is given within the trial period, the dismissal cannot be challenged in the Employment Relations Authority or the Employment Court. It is important to note though that a dismissed employee within the trial and notice period my still:
- Apply for mediation;
- Raise a personal grievance on the grounds of discrimination, sexual or racial harassment provisions (in accordance with the relevant provisions of the Employment Relations Act 2000).
In addition to the new trial periods the general probationary period arrangements that exist under section 67 of the Employment Relations Act 2000 still apply and provide a source of challenge to employees for a personal grievance in the normal course of events, even if their dismissal occurs within the 90 day period.
Time will tell as to whether trial periods prove to be a help or a hindrance for employers. Trial periods are themselves widely on trial at the moment, so employers using or thinking of using trail periods should keep their ear to the ground over the coming months during which time the effects and effectiveness of the new trial period legislation will become much clearer.
HRINZ would like to acknowledge and formally thank Barbara Buckett, of Barbara Buckett & Associates who is the author of this article and given express permission for HRINZ to re-publish this article on their website.
HR Tool Kit:
- Individual Employment Agreements
- Casual Employment
- Employment Agreement Guide & Fact Sheet
- Employment Agreement Builder
- Letter of Appointment
- Disciplinary Action
- Employers Guide to Employment Relations
- Employment Legislation
- Adult Minimum Wage
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