90 day trial periods - can they benefit your business?
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A quick look at statutory 90 day trial periods and what employers need to know
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90 day trial periods - can they benefit your business?
- 1. 90 Day Trial Periods 10 Minute Presentation Series
- 2. Why use trial periods? Increase confidence in hiring decisions Low risk opportunity to assess an employee’s suitability Create more opportunities
- 3. Requirements In writing Signed before employment starts New employees only Reasonable opportunity to take advice No surprises – Good faith Notice period Questions?
- 4. Next Steps Contact Grow HR on 06 878 5454 or email Gerrad@growhr.co.nz for any further information and assistance
Editor's Notes
- No-one intentionally makes a bad hire, but we all know that it happens from time to time. Experience of a bad hire and the process/effort that goes in to resolving that can make employers a bit gun-shy – reluctant to hire for fear of being burned again. Trial periods give employers added confidence – they can make an appointment knowing that, if the employee turns out to be a lemon, they can use the 90 day trial to get rid of them. Provides low risk opportunity to give someone a chance – particularly relevant where there’s a business need, but the pool of candidates isn’t overwhelming; or where it’s not clear that there’s a business need – provide an opportunity to show their worth, add value. Theory is that if employers are more confident about hiring decisions, more willing to give people a crack, will be more recruitment/hiring activity and therefore more opportunities for candidates.
- 90 Day trial period provisions must be in writing in the employment agreement Must be signed before employment starts – If employee starts work before signing agreement with trial period provision, trial period is unenforceable Trial period only applies to new employees – Intention of trial period is to enable employer to assess employee’s suitability. Cannot apply to an employee who has previously worked for employer, will not apply to an employee who has previously been engaged as a contractor, and though hasn’t been tested, Court has indicated would not apply in a situation where a business is purchased by a new employer, where technically the employees are new employees of the new employer, although in all other respects their employment remains the same. Assumption that in these scenarios Employer should be familiar with employee’s suitability Must give new employee reasonable opportunity to take advice before signing 90 day trial period. If turns up on day one and hasn’t signed, sitting them down and making them sign before they commence work will not be sufficient – Courts have indicated that even a couple of days may be insufficient to enforce trial period, depending on the circumstances – must have a genuine opportunity to consider the agreement and seek independent advice No surprises – Employers can still be captured under good faith obligations – Generally exercising the 90 day provision shouldn’t come as a complete surprise – Employer should be signaling to Employee if performance isn’t up to standard or behavior unacceptable before exercising right to terminate. Also obligation to be responsive and communicative. While don’t have a strict obligation to provide reason when exercising right to terminate, if asked by employee for reason, have good faith obligation to provide. Failure to do so may result in breach of good faith obligations under the Act. Trial period provision only protects against unjustified dismissal claims. Employees on trial periods are still entitled to all other minimum employment rights, for example public holidays, annual leave and equal pay as well as being protected against discrimination, harassment or unjustified action by the employer. May still be subject to unjustified disadvantage claim if fail to act in good faith, treat employee fairly and with respect during employment relationship. Notice period – So long as notice given within 90 day period, Employee can continue to work out notice period after 90 day period has passed. Court has said that employee must be given opportunity to work out notice period, Employer cannot unilaterally decide to pay out in lieu of notice. Can seek agreement from employee that they be paid our however. Risk is that have a disaffected employee in the business working out notice period. Not ideal for anyone so recommend a separate and shorter notice period that applies in 90 day trial situation. Notice – Must be given in accordance with the terms of the employment agreement – i.e. if the agreement states notice will be in writing, written notice must be given within 90 days.