With the return of 90-day trials being available from 23 December 2023 for all employers in New Zealand, no matter their size, it is important that you understand the rules and apply these correctly to ensure you have a legally enforceable trial period in your employment agreement.
First you need to determine whether having a 90-trial is appropriate for your business. Not all businesses will necessarily require having trial periods. For example, if you're hiring people on certain work visas, you will also need to consider any immigration requirements relating to the use of trial periods. The important point to remember is if you are going to have a trial period this must be agreed to by the employer and the employee in writing, and in good faith, before the employee starts work, as part of their employment agreement.
Putting a trial period into a letter of offer is not sufficient. It must be expressly provided for in the employment agreement and the period of the trial must not exceed 90-days. This is calendar days - not working days.
The trial period can be less than 90-days, however, may not be extended. You may only apply the trial period once to a person. This means if they have worked for you previously in any capacity then you cannot apply a 90-day trial when you re-employ them. In these circumstances you can have a probationary period but must follow normal due process if the employee is not working out.
The employer and employee must still deal with each other in good faith during the trial period.
To be valid, a trial period must:
be agreed to in the employment agreement before the employee starts work, or the trial period is invalid
have a valid notice period in the employment contract
must be agreed by the employer and employee in good faith – you can't force an employee into being employed on a trial period.
be in the employment agreement and must state that:
from the very start of their employment, the employee will be on a trial for a set period which isn’t more than 90 days (but can be less). The exact time period must be stated, for example, it could be 30 days, or 90 days, or another stated time period; and
during the trial, the employer can dismiss the employee; and
what period of notice will be given (if different to your normal notice period); and
the employee can’t bring a personal grievance or other legal proceedings about their dismissal.
If you have a trial period and the employee is not working out, generally to meet your good faith requirements, you should give the employee an indication of what they are doing that may put their trial in jeopardy, so they have the opportunity to correct their behaviour. If despite this, the employee is not working out then you may dismiss the employee without having to go through a performance improvement or disciplinary process.
When you exercise your right to terminate the trial, it is important that you inform the employee that you are "terminating the trial" in accordance with their employment agreement.
You must give the required notice. If your trial period clause does not specify the notice to be given, then the notice that applies for normal termination of employment will apply. You can have a shorter notice period for the trial period but must specify this in the clause.
You must also give notice of termination of the trial before the end of the trial period, even if the notice period extends beyond the notice period. If notice is given outside the notice period, then you cannot rely on the trial period clause for the termination and must follow full due process before terminating the employee.
McKone Consultancy can provide you advice on having a trial period and before you terminate an employee using a trial period clause.