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Trial periods vs Probationary periods

On Monday 6 May, the legislation changed so that only businesses with less than 20 employees could utilise trial periods. 

It doesn’t matter if you employ casuals, permanent or temps. If you thought you could get around this by thinking it was less than 20 full time equivalent staff, you were wrong.  It applies to your actual employee numbers.

So, what are your options if you have 20 or more staff then??  You have good ole performance management and probationary periods available. 

What are probationary periods?

Probationary periods have not been commonly used in NZ.  Unlike our counterparts in Australia.

A probationary period is a clause in the employment agreement that makes clear the length of time an employee is in training and can prove that they are a suitable person for the role. 

A probationary period can apply to a new employee or an employee who is changing their role, and you want to trial them in a new position.  But to make it clear, in NZ, a probationary period is not the same as a trial period.

During the probation period, your focus should not be on the employee proving themselves to you.  It is about you supporting them through their transition into your business.  You must always act in good faith and be fair. 

During the transition (aka probationary period) for it to be effective, you must:

  • be clear with your feedback and demonstrate what good performance is and the expectations of the job;
  • provide appropriate training, support and resources;
  • provide opportunities for the employee to voice their views, concerns and ask questions; and
  • give the employee a reasonable amount of time to improve, adjust and make the transition

The above points all boil down to you providing:

  • good communication of expectations, the issues and possible outcomes;
  • good induction and performance development processes; and
  • the employee the same minimum employment rights as any other employee.

If you want to exit an employee under the probationary period, the same rights apply.  You must follow a fair and reasonable process and operate in good faith.

There is more flexibility with the length a probationary period can be.  Typically, probationary periods are 3 to 6 months long.  Deciding on the length of the probationary will come down to how complex the role is and what there is to learn. 

Our general advice is for routine and process orientated roles, or for existing employees moving into new roles, three months is likely to be enough. Roles where the employee needs to acquire a depth of information and systems, and/or may have activities that are time based (i.e. 6 monthly reporting) you could consider a longer probationary period like 6 months.  

Probationary periods longer than 6 months are possible, but we would question if such a long probationary period is reasonable in the context of the business and the expectations of the job and employee.

How the probationary period is executed comes down to what is written into the employment agreement.  For example, you may want to end it early if things are going well, or you may want to extend it to give the employee more time.  For you to be able to do either, it must be written into the agreement.   Before you start considering your desired terms, the terms must be fair and the employee must have had reasonable opportunity to read, seek advice and before agreeing to the terms. 

What we can learn from the introduction of trial periods is that a successful probationary period will come down to the detail, the process you follow, and if you have acted in good faith. 

A Recap on trial periods

The legislation wording for trial periods is much the same.  To have an enforceable and valid trial period, you still must ensure that:

  • The employee has not ‘worked’ for you before;
  • They have had reasonable opportunity to consider and review all the terms of employment (i.e. employment agreement) before they agree to the job offer and sign the agreement;
  • They must have signed the agreement before they start.  On the first day doesn’t count as they have already started work; and
  • Advise them that the trial period is applicable at the time of job offer but you should be doing this during your recruitment process so there are no surprises when you present the job offer.

It is once you employ your 20th employee that you no longer can use the trial period. 

So, if you employed your 19th employee in April, and then another in June, the trial period of your 19th employee will still stand but you won’t be able to use it in the agreement for your 20th employee and any subsequent employees thereafter.  

If you have 16 employees and you have plans to hire more in the next 6-12 months, you need to start hiring as though you don’t have the trial period available to you.  Get familiar with probationary periods and set up your processes so they are in place and operating the way you want before you need them.

In case you were wondering, any trial period that was entered into prior to 6 May 2019 will continue to be valid.

Our philosophy

Our philosophy when it comes to probationary periods and trial periods, is that they are useful, but you are better to invest in having robust recruitment, induction and performance development processes that repeat and reinforce key messages and expectations. 

You can achieve this by:

  • Having a methodical, thorough and human recruitment process.
  • Applying the right check and balances before you offer the job.
  • Providing standardised processes and training where possible.
  • Following through with scheduled performance development conversations (e.g during week 1, then week 2, then week 3, then month 2, then month 3 etc).

All of this will go a long way to developing the person into a great value-adding employee.  

If you don’t bother with reference checks or asking candidates to demonstrate their competency before hiring them, based on our experience, you are asking for employment problems in the first 18 months.  

A probationary period or trial period should only be there for that one-off occasion where an employee simply doesn’t meet the mark.  This doesn’t happen often, but by having the clause it allows you to take constructive and effective action fast. 

Letting someone go after they have already started is not a good experience for anyone to go through.   It is draining and negative.  Don’t just do the minimum and then rely on the probationary period or trial period to save you from the consequences of making wrong hiring decision. It is just too risky and going to cost you more in the long run.  It may not just be the bank account that gets hit either.  Reputation, service delivery times, culture and quality of work can all suffer when you have the wrong people in the business.

By making the investment into your employment processes and pre-employment checks, you are sending a clear message to your candidates and employees.  You have expectations and standards, and you are committed to having the right people in the business doing great things, and that what they do won’t go undervalued either.

In our experience, those that have great processes, rarely use the trial period or probationary period clauses.  When they do use them it is due to the role or the culture not being quite right the fit for the employee.  Either party may have known that from the outset but chose to take a chance anyway.  

Not sure if your processes are great?  Have you been burnt with a bad new hire and don’t want the heartache again? 

Act today! Give us a call so you move forward and see the forest for the trees.