Changes to trial period requirements

After a fast-tracked process through parliament, on 21 December 2023 the Government reinstated the ability for all sizes of employers to employ workers under 90-day trial periods. This change was campaigned for by both National and ACT.

The trial period scheme was originally introduced by National in 2009 for business with fewer than 20 employees, followed by a rollout to all employers in 2011. Labour then limited the scheme in 2019 to small businesses, reintroducing the 20-employee cap. The December 2023 changes put the law back in the position it was in 2011.

The Workplace Relations and Safety Minister, Brooke van Velden, has stated the change will make a “huge difference to the labour market”, as 72% of employees in New Zealand are employed by businesses with 20 or more employees. The change “provides confidence to businesses to employ a new employee without risk of a costly dismissal process and risk of disrupting the workplace culture, providing certainty for employers to make decisions and get ahead”.

Following this change, employers of all sizes may again include 90-day trial periods in employment agreements. Bear in mind however that there are still a number of procedural hurdles and requirements to satisfy in order for these provisions to be lawful and enforceable. Set out below is a checklist for the key issues to consider:

• During a valid trial period, an employer may end an employee's employment without cause and without following the consultation process that would otherwise be required;
• An employer cannot employ an employee on a trial period where that employee has previously worked for the same employer, in any capacity;
• In order for a trial period to be valid, it must:
• have been agreed to in the employment agreement after they have had a reasonable opportunity to seek independent advice and before the employee starts work;
• include the start date and duration of the trial period (the period may be less than 90 days, but no more than);
• state that during the trial period the employer can dismiss the employee and the employee cannot bring a personal grievance or other legal proceedings about their dismissal.
• During a trial period, employees still have all minimum employment rights and responsibilities. The only exclusion from rights employees would otherwise have is the right to bring a personal grievance for unjustified dismissal;
• Even if an employee is on a trial period, they can still bring a personal grievance on grounds other than about their dismissal, for example discrimination and/or sexual or racial harassment.

Bear in mind that complications can arise for employees employed under a collective employment agreement. The ‘30-day rule’ applies to any new employees whose work is covered by a collective employment agreement. If an employee is a union member employed on a collective employment agreement, or a new employee is captured within the ‘30-day rule’ it is not possible to employ them under a trial period if this is inconsistent with the collective employment agreement.