Payroll Bulletin 16

Written By Natasha Ghag

PROBATIONARY PERIOD vs 90-DAY TRIAL

Employers often want flexibility to assess whether an employee is going to be able to have the skills to fulfil the role.

Under the Employment Relations Act 2000 (Act), probationary periods and 90-day trials are useful tools for employers to do so.

While they have a similar purpose, employers have different obligations under each, and they apply differently.

90-day trials

90-day trial periods are governed by section 67A and 67B of the Act and allow an employer to dismiss the employee within those 90 days. From December 2023, all employers, regardless of size, can use them.

Some important aspects of 90-day trials are:

  • They allow an employer to dismiss a new employee in the first 90 days of their employment.

  • The employee must be given reasonable opportunity to get independent advice on the trial clause.

  • The trial period clause must be contained within the employment agreement.

  • The trial cannot be longer than 90 days, although it may be shorter.

Good faith obligations will still apply.  It might therefore be good practice for employers to consider providing some reasoning for dismissal and inviting the employee to a meeting (with a representative and/or support person) to discuss.

Probationary periods

Probationary periods can be used at the beginning of the employment relationship or when an employee starts in a new role, even if the new role is for the same employer. Under section 67 of the Act, it must be specified in the employment agreement that the employee is subject to a probationary period. However, the simple presence of a probationary period in the employment agreement does not prevent an employee from bringing a claim of unjustified dismissal if their employment is terminated pursuant to that probationary period.

The Court of Appeal set out some principles in relation to how a probationary period must be applied in Nelson Air Ltd v New Zealand Airline Pilots Association:

  • The employee should usually be allowed to work out the full probationary period.

  • The employee should receive proper training.

  • The employee should be made aware of any shortcomings or other problems during the probationary period.

Employers must make sure to inform employees if their work during the probationary period is not up to standard and allow them time and resources to improve.

The differences between a 90-day trial and a probationary period

  • Length of time: a trial period cannot last longer than 90 days. Probationary periods do not have a fixed time limit so can be used for a longer assessment period if the employee and employer agree.

  • Reason for dismissal: if an employee has been on a trial period, their employer does not have to give a reason before dismissing them. If an employee has been on a probationary period, their employer must give them a good reason for dismissal and a fair opportunity to resolve any problems first.

  • Previous employment: an employee can only be on a trial period if it’s their first time working for that employer. An employee can be on a probationary period if they are new to the organisation, or if they already work there and are trying out a new role

Can an employee be subject to both a 90-day trial and a probationary period?

The short answer here is no. However, this question has not been answered in full.

It is certain that an employer cannot apply a 90-day trial and probationary period simultaneously, due to the differences outlined above. In Lewis v Immigration Guru Limited, Mr Lewis’ employment was subject to both a 90-day trial and a probationary period. It was held the employer could not terminate the employee’s employment pursuant to the 90-day trial period, as they had not met their obligations of fair warning and procedural steps under the probationary period.

Employees who are union members

Union members employed on a collective agreement cannot have a trial or probationary period in their individual terms and conditions that is inconsistent with the collective agreement.

For example, if the collective agreement says that the employee cannot be employed on a trial period, then there cannot be a trial period in their individual terms.

Source of information

If you have any questions or need further information, please don't hesitate to contact Olga at olga@topflight.co.nz



Natasha Ghag
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Payroll Bulletin 15