Including a trial period in employment agreements can safeguard your business from hiring individuals who may lack the necessary skills or the right attitude. However, it’s crucial to implement these periods correctly.
Learn everything you need to know about trial and probation periods.
Trial periods
What you need to know
You must:
- Include a trial period in the employment agreement (up to 90 days) and ensure both parties sign it before the employee starts work; otherwise, it won’t hold up legally if challenged.
- Provide the employee with all the benefits of a permanent staff member, such as holidays and sick leave, during the trial period.
You cannot:
- Place an existing employee on a trial period only for new hires.
- Extend the trial period once it concludes; the employee automatically becomes permanent unless dismissed before the trial period ends.
If you decide to dismiss the employee within the trial period:
- They cannot raise a personal grievance for unfair dismissal.
- They can still raise a personal grievance if they believe they have been discriminated against or harassed.
- The notice period still applies.
Case study: Testing times
Mark’s plumbing business is expanding rapidly, necessitating the hiring of additional staff. He recruits two skilled plumbers, Jim and Thomas, with both entering a trial period of 90 days as per their employment contracts.
Early on, Thomas demonstrated his competence in meeting the high standards of workmanship required, receiving positive feedback from customers. Mark is confident that Thomas will bring significant value to the business and could potentially handle more responsibilities in the future.
Within a month, it becomes evident that Jim consistently arrives late and produces work that fails to meet expectations.
Mark initiates a conversation with Jim to understand the issue, considering the possibility that Jim might lack the necessary tools or support. Jim fails to provide a satisfactory explanation, leading Mark to issue an initial warning. He documents the discussion in Jim’s file and schedules a follow-up meeting.
A week later, Jim’s performance does not improve; in fact, it deteriorates further. Mark reviews the employment agreement, which mandates a two-week notice period for dismissal. He informs Jim of the decision and offers a severance package as an alternative. Jim agrees, and Mark proceeds with his employee exit procedures.
Fact: A trial period is only valid if included in a written employment agreement.
Probation periods
A probationary period differs from a trial period in that it:
- Has a defined duration agreed upon in advance.
- Begins at the commencement of employment.
- Allows new employees, including existing ones applying for a different role within the company, to showcase their skills.
- Enables employers to evaluate their performance.
What you need to know
You must:
- Include the probationary period in the employee’s contract before they begin work.
- Provide the employee with all benefits of a permanent staff member, such as holidays and sick leave, during their probation.
You can:
- Use a probation period no matter how many employees you have.
You cannot:
- Use the probationary period as a means to obtain free labour; the employee must receive full wages.
If you decide to terminate the employee during the probationary period:
- They retain the right to raise a personal grievance for unfair dismissal.
- You must adhere to a fair dismissal process.
- You must demonstrate a valid reason for the dismissal.
If the reason for dismissal is related to probation, it should be because the employee has not met the expected performance standards within the agreed-upon timeframe. To validate this reason, you must have provided adequate support and training to the employee.
Don’t use a fixed-term contract in place of a trial or probation.
It’s not allowed to hire an employee on a fixed-term contract unless there’s a genuine reason for the job to be temporary, such as seasonal work or covering parental leave. Read more about fixed-term contracts
If you run into problems — mediation
During a trial or probation period, both you and your employee can seek assistance from Employment Mediation Services. Their services are free, private, and confidential. They can assist in:
– Resolving issues
– Identifying problems
– Improving communication
Mediation can take place through:
– Email or phone communication
– Face-to-face meetings in a private and comfortable setting
Employment New Zealand’s contact page
Trial and probationary periods — Employment New Zealand
Employment Mediation Services — Employment New Zealand
Resolving employment issues — Employment New Zealand
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