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Probationary period would help more into jobs

March 2006

Probationary period would help more into jobs

The Employment Relations (Probationary Employment) Amendment Bill would help more people find jobs, says Business NZ Chief Executive Phil O’Reilly. He says employers can be reluctant to employ people without a previous positive employment record, and the proposed legislation would help overcome the risks of doing so.

Mr O’Reilly says it would benefit teenagers whose unemployment rate is much higher than the national average, new migrants whose skills are often not well used, and other groups whose unemployment rates exceed the average.

“Currently, many employers are nervous of the risk if the employment doesn’t turn out. Many small businesses have faced ‘unjustified dismissal’ claims following the termination of employment of a fairly new employee. Often this is where someone has been hired in good faith, but where the employment relationship didn’t work out - where it turned out that there was not a good fit between the new employee and the workplace, where motivation, behaviour or work habits were not appropriate, or where work output was below expectations. This is something that is hard to predict in advance.

“An employer may have to find extra resources to turn the situation around, as well as to have that person’s job done by someone else. In that situation, an employer may need to consider dismissal, because the costs involved are just too great.

“The process for dismissal is quite complicated. A small business owner with little knowledge of employment law could quite easily get one of the steps wrong, and become liable for an ‘unjustified dismissal’ claim because of a procedural mistake.

“With an increasing number of grievance claims using a lawyer or other advocate on a ‘no win, no pay’ contingency basis, this has a significant impact. The costs to defend against the claim can be large, while with a contingency fee arrangement, the ex-employee faces no costs if the case is lost, and gains a lump sum if it wins. The contingency fee arrangement can also encourage the lawyer or advocate to adopt an unduly aggressive attitude towards the case and to seek higher than justified damages.

“In this situation, many small employers settle out of court, even if the claim is flimsy or based on a procedural mistake. They may have already paid a lot of money because of the extra costs incurred during the period of employment, and can’t afford to lose more money and time.

“The Bill would bring a probationary period of 90 days where the ‘unjustified dismissal’ rule would not apply. This would help discourage the grievance ‘industry’ that seems to be building up in this area, and would encourage more employers to take the risk of employing those currently underrepresented in the workforce. Probationary periods are widely used overseas for this reason,” Mr O’Reilly said.


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