90 Day Trial Periods are Back for all Organisations (not just the small guys).

Organisations of all sizes can once again have 90-day trial periods for new employees. Changing the legislation was a priority promise for the new government and it came into effect on 23 December 2023. There are some rules that apply for trial periods to be considered valid. It is critical they are adhered to as failure to do so could result in an unfair dismissal personal grievance (which defeats the whole purpose of using them).

1. The trial period can only apply to new employees to your organisation. If the person has previously been an employee there cannot be a 90-day trial period for them. This includes someone who has worked as a casual or even someone who has worked for a couple of minutes before signing their employment agreement. This may also include short, unpaid ‘work trials’.
2. There must be a compliant trial period clause in the written employment agreement. The legislation has specific requirements for a trial period clause. The agreement must be signed before the employee starts work or turns up for work on the first day. It is also important to keep in mind that an employee has a right to seek independent advice (and have time to do so) before signing an employment agreement. Therefore, handing a person an agreement to sign there and then, so they can start working straight away is likely to invalidate any trial period you have included.
3. There are certain work visas that do not permit trial periods. Check with immigration or your immigration advisor on requirements.
4. The trial period is for 90 calendar days – not working days. If the employee is off sick or absent from work for any reason, those days are still counted, as are their days off.
5. The employer still has a duty of good faith. This includes being communicative and if there is a decision likely to affect an employee’s ongoing employment you have an obligation to discuss this with them. In other words, if the new recruit is not meeting your required standards you still need to tell them and advise them of the potential consequences of not meeting those standards i.e. dismissal under the 90-day trial period provision.
6. The employer must ‘give notice’ of the dismissal within the 90-day period, however the end of the notice period may take the employee outside of the 90-day period. For example, the employee’s employment agreement states a two-week notice period for termination of employment. The employee is advised (in writing) on day 89 of their employment that their employment is to be terminated under the 90-day trial period. The two-week notice period obviously takes the employee beyond the 90 days. This is still a valid trial period termination. Hopefully, there will be a clause in the employment agreement providing for pay in lieu of notice. While an employer may not wish to pay an unsatisfactory employee to not work their notice period, I can assure you the disruption created by someone you have dismissed, over that notice period, will not be worth it.
7. An employee under a valid 90-day trial period MUST be dismissed on notice, even if their conduct is serious misconduct. This is because the wording in the Employment Relations Act 2000 refers only to ‘dismissal on notice’.  Therefore, it pays for your employment agreement to provide for a lesser notice period (say a week) if they are dismissed during the trial period.  And, as reiterated above, it is far better to pay them out their notice period than continuing to have them in the workplace. And paying them out their notice also satisfies the requirement that they have been dismissed ‘on notice’ rather than summarily dismissed without notice.
8. If you have a Collective Agreement (with a union) that specifically excludes trial periods, you cannot have a trial period for anyone covered by the coverage clause of that agreement.

If you are looking to introduce trial periods to your organisation, please get in touch with one of our Consultants and we can advise you and provide a compliant clause for your employment agreements.  Likewise, if you are considering dismissing someone who is under a valid 90-day trial, please contact us first so we can make sure that your 90-day trial period is valid, and that you dismiss them ‘on notice’.