Trial Periods - what you need to know

Trial periods can be a very useful tool for employers to see if their new hire is the right fit for the business, however, the rules around when and how to use trial periods can be tricky, and if you don’t get it right then you can end up in hot water.

For example, in a recent case the Employment Relations Authority recently decided that the trial period in question could not be relied upon to dismiss the Employee as they signed their employment agreement after they started work. The Authority found that the Employee had been unjustifiably dismissed, costing the Employer $12,000.00.

With this in mind, it is worth reviewing what the requirements are to make sure your trial periods are compliant.

The basics

  • When can I use a trial period? Trial periods can only be used if you employ fewer than 20 employees at the beginning of the trial period, and they can’t be used for someone you have employed before.
  • How long can the trial last for? The maximum length a trial period can last is 90 days, although it can be less if you prefer, you need to put it very clearly in your employment agreement how long the trial period is going to last and what the notice of termination length will be under the trial.

Starting the trial period

The trial period starts when the Employee actually commences work, not when they sign the contract. One really important thing for employers to remember is to make sure the employee has signed and returned their agreement before they start performing duties. There are a lot of cases where the employee signed the contract after they had already started their job, even only an hour later, and the trial periods the employers relied on were held to be invalid.

Ending the trial period

If an employee under a trial period isn’t working out, you must give them the notice specified in their employment agreement. Under a trial period there is no requirement to give the employee a reason why you are terminating their contract, and if you gave proper notice they cannot bring an unjustified dismissal personal grievance. They can however still bring other personal grievances as normal if, for example, they have been harassed or unjustifiably disadvantaged).

Case: Shannon v Freda Wiley Limited [2022] NZERA 617