Significant industrial relations changes have been a regular feature of the New Zealand landscape over the past couple of years, and changes to trial periods are just the latest to impact businesses. Before the passing of The Employment Relations (Trial Periods) Amendment Bill 2023 in late December 2023 expanding 90-day trial periods to bigger businesses, trial timeframes of this size were strictly available to employers with 19 or fewer employees.

Here we explain these legislative changes, what they mean for businesses, and explain the requirements employers must follow to ensure the trial period is valid.

What is a trial period?

A trial period is a set timeframe that employers can use to determine whether an employee is suitable for the role they’ve applied for. Trial periods – also known as probationary periods – are defined as a set timeframe that employers can use to determine whether an employee is suitable for the role they’ve applied for.

While an integral part of the employment landscape, for them to be fair and transparent, employers must understand the rights and obligations outlined within the Employment Relations Act 200. Before 23 December 2023, trial periods were only valid if the employer had fewer than 20 employees however, since the legislative change, a business of any size can now use this instrument.

These periods allow employers to evaluate an employee’s performance, work ethic, and overall fit within the organisation, helping to determine whether the role aligns with their skills, goals, and expectations.

Key features of trial periods:

1. Duration: trial periods in New Zealand can’t be longer than 90 days. During this time, either party can terminate the employment relationship without the need for the usual notice period. However, in the employment agreement, under the trial period clause, a notice period shall be stipulated.
2. Employer obligations: employers must specify the existence and duration of the trial period in the employment agreement before the employee begins work. Failure to do so can render the trial period invalid.
3. Employee rights: despite being in a trial period, employees are entitled to all other rights and entitlements provided under New Zealand employment law, including minimum wage, holidays, and health and safety protections.
4. Dismissal during trial periods: if an employer decides to terminate an employee during the trial period, they must provide written notice of termination. However, this notice doesn’t need to specify the reasons for termination. Employees dismissed during the trial period don’t have recourse to challenge their dismissal under unjustified dismissal provisions.
5. Unjustifiable dismissal protections: despite the limited recourse for challenging dismissal during a trial period, employees are still protected from unlawful termination, such as discrimination, harassment, or bullying.

Key considerations:

• Employers must ensure that the terms and conditions of the trial period are clearly stated in the employment agreement.
• Employees must be given a reasonable opportunity to demonstrate their skills and capabilities during the trial period.
• Any termination during the trial period must be fair and reasonable and not based on discriminatory grounds.
• Not all employees are eligible for trial periods. For example, employees rehired by the same employer, employees transferring to a new role within the same organisation, and employees employed for less than 90 days under a previous trial period are excluded.

About our author

Shabina Sahu Khan is a Workplace Relations Consultant at Citation HR and assists various clients via the HR Advice Line. After obtaining her law degree, she specialised in Family and Commercial Law but found satisfaction in Employment Law and HR. With over 14 years’ experience, she supports New Zealand-based clients with their employment law needs and has no hesitation in going that extra mile for a client in need.