Debunking 90 day 'trial period myths'
Treasury research released in June shows 90 day trial periods have had little effect so far and it also shows employers are still having trouble using trial periods.
Given the Government has made it clear it would not be getting rid of the controversial law, it only makes sense for employers to use it properly and get their heads around "trial period myths".
Davenports Harbour employment lawyer Bronwen Newcombe says despite Treasury's findings, her personal experience is that the trial period does increase employer confidence when hiring, both in terms of ensuring the right person is chosen and that there is enough work available.
However, she says this increased employer confidence only exists when employers know the legal processes and have robust employment agreements.
It is often small to medium businesses that get into trouble for not following the law, due to a lack of in-house lawyers and human resource advisors.
Some "trial period myths" include: trial periods automatically apply, verbal agreement is enough for a trial period, staff cannot raise personal grievances in relation to trial periods, and trial periods cannot be used by employers with 20 or more staff.
Newcombe says there are some basics that employers should know in order for the trial period to be valid.
- The worker must be a new employee.
- There must be a written employment agreement that contains a trial period clause.
- The trial period clause must comply with the requirements of the Employment Relations Act 2000.
- The employment agreement must be signed by the worker before they start work, meaning if the worker starts at 9am and their agreement is signed at 9.05am on the same day, it is invalid.
- The worker must have had enough time to get independent legal advice on the employment agreement.
- And if required, notice under the trial period must be given within the 90 days.
Legal requirements for trial periods can be found in the Employment Relations Act, but some are still developing through the common law.
The consequences of getting things wrong are time-consuming, financially draining and stressful for employers; staff can raise personal grievances, which means the employer may have to go to mediations, hearings and possibly court.
"In my experience, regardless of the size of the business, all employers find the process of defending a personal grievance claim stressful and costly," Newcombe says.
Business.govt.nz manager Matt Kennedy-Good says they have received consistent feedback that the 90 day trial gives employers confidence in hiring people when they otherwise might have been unsure.
The government website for small businesses has an employment agreement builder that helps employers by not adding trial period clauses when they are not allowed to, such as when the contract is for a casual worker.
When employers get to the trial period clause, an about section is always visible and they can access pages on tips and common mistakes, as well as click a link to full information at Employment.govt.nz.
More than 18,600 employment agreements have been made since the tool was launched in April this year and of the 14,000 contracts made so far for non-casual staff, almost 60 per cent have had trial periods.