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5 min read - January 25, 2024

What the Re-Introduction of Trial Periods Means for Employers

With the commencement of the new Government in 2023, new regulations have been implemented, including an update to employment legislation. On 23 December, while most Kiwis were heading to the beach and popping some festive bubbles, a change to the Employment Relations Act came into force expanding the use of a trial period (of up to 90 days duration) to now include all businesses regardless of size. Legislation that was previously only available to businesses with 19 or fewer employees, can now be utilised by all businesses, however there are both exceptions and responsibilities that employers will need to be aware of when applying the trial period legislation to their business.

The basics

The trial period was designed for both employers and employees to assess if the role is well suited to the individual. Where either party wishes to end the employment relationship, then there is often an agreed shorter notice period stated within the employment agreement trial period clause which allows both parties to move forward quickly.

From an employer perspective, the trial period itself allows for employers to ‘let go’ of employees, without having to state the specific reason and without risk of a personal grievance related to the ending of employment.

The maximum duration of the trial period is 90 calendar days from the first date of employment. A lessor trial period duration can be agreed (for example 30 or 60 days). The duration of the trial period must be documented within the trial period clause.

To use this trial period, employers will need to make sure that this is clearly stated and agreed upon within an employee’s written employment agreement, and that this agreement is complete and signed before the employee’s first working day. Employers need to be careful not to invalidate a trial period clause, through the use of pre-start training/inductions, recruitment trials, or other pre-commencement work practices.

The employer must also give adequate time between providing the written offer and employment agreement, and the start date. This is to provide an employee adequate time to review, consider and/or seek advice on the employment agreement terms, including the inclusion of a trial period.

The exceptions

Employers must keep in mind that they can only use this for new employees (they cannot apply it for individuals who have previously worked for the same organisation, or participated in other forms of work trials with the organisation). Also, the use of a trial period clause in an Individual Employment Agreement, can not be inconsistent with a relevant Collective Employment Agreement covering that employee.

In addition, the trial period cannot be used for an offer of employment as part of the AEWV (Accredited Employer Work Visa) Scheme. For more advice and information regarding the AEWV Scheme obligations, support to manage your accreditation applications/renewals, or your offer processes under the scheme, please contact our helpful team of immigration specialists at K3 Legal.

The obligation for Good Faith

Once the trial period has commenced, the employer must ensure that they are acting in good faith; providing the employee with appropriate training, having adequate and timely lines of communication, treating the employee with fairness etc. Whilst an employee cannot raise a personal grievance related to the end of their employment, the trial period does not stop them from being able to bring a claim related to the way they were treated during employment, such as a claim or bullying, harassment, discrimination or unjustified disadvantage etc.

Managing the end of employment

The notification of the end of employment must occur within the timeframe set-out within the trial period clause (up to a maximum of 90 calendar days) of the employment agreement.

If the employer initiates the action, then they are required to pay the employee’s notice period, and it is common practice that the employee is not expected to work this period. If the employee’s notice period would take them past the trial period duration, any notice period still owing at the completion of the trial period duration can be paid in lieu of notice being worked. However, as long as notice of termination is provided within the trial period duration specified in the employment agreement, the notice period an employee works can exceed the trial period duration.

The employer does not have to give reasons for ending employment during a trial period, nor give the employee a chance to comment before the decision is made, however it is good practice to communicate to the employee why the trial period is being utilised, and this must not be misleading or deceptive.

If a notification is not made within the trial period timeframe, the trial period clause becomes invalid and then the employee will simply continue in their role. An additional agreement is not needed to confirm employment or the successful completion of the trial period.

Trial Periods and attraction of talent

While thinking about implementing a trial period, it is important that as a prospective employer, during your recruitment process you take into consideration how this may look from a candidates’ perspective. Depending on your field, you may be experiencing high competition for your preferred candidates; and while it is important that you protect your organisation, it may be just as critical to ensure you don’t lose strong candidates.

In a market where there is strong competition for employees, candidates are more likely to want to negotiate offers of employment without trial period provisions, or seek reduced trial period durations.

Getting your documentation right

If you’re thinking of adding a trial period to your upcoming offers, you’ll want to make sure you get it right, as well as making sure all other aspects of your employee agreements are up to date - this process can take time and focus. If needed, our team of HR consultants are here to help. Contact us today for a review and refresh of your organisation’s employment agreements, as well as guidance towards creating a well-implemented trial period for you and your future employees.

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