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Trial Periods Used to Reduce Risk: Department of Labour

27 june 2012
Trial Periods Used to Reduce Risk: Department of Labour Research

New research by the Department of Labour shows employers are using the 90-day trial periods to reduce the risk of taking on new employees.

The Employers’ Perspectives – Part One: Trial Periods research is based on the findings of the National Survey of Employers of around 2,000 employers and qualitative interviews with 53 employers in Hawke’s Bay, Wellington, Auckland and Dunedin/Invercargill from the retail, hospitality, agriculture, forestry and fishing, and manufacturing industries.

“This report discusses employers’ perspectives of the 90-day trial period provisions introduced for Small-Medium Enterprises (SMEs) in 2009 and larger employers in 2011. Our latest research shows that 60 percent of hiring employers are now using the trial periods, and even more intend to use it in the future,” the department’s General Manager, Labour and Immigration Research Centre Vasantha Krishnan says.

“This report does not cover employees’ perspectives. We are looking at ways to obtain these in an evaluation scheduled for later this year,” Ms Krishnan says.

Other findings are:

• Sixty percent of hiring employers in the national survey reported using a trial period since its introduction (49 percent in 2010). There is not a significant difference between the level of use in SME’s and larger employers.
• Employers use trial periods to address risk when hiring, for example:
o To check an employee’s ability for the job before making a commitment to employ permanently (66 percent)
o To employ someone with the skills required, but where the business is unsure about their ‘fit’ with the workplace (35 percent)
o To avoid incurring costs if staff are unsuitable for the job (13 percent)

• Employers used trial periods to test the viability of a position (rather than person) within the business, saying they would not have filled their most recently vacant position without a trial period. This was more likely in SME’s (30 percent), compared with 17 percent for larger employers.
• Trial periods improved employment opportunities - 41 percent of employers in the national survey said they would not have hired the most recent employee without a trial period.
• SME’s were more likely to use trial periods to take a risk - 44 percent of SME’s would not have hired the last trial period employee without the use of a trial period, compared with 28 percent of larger employers.
• Youth and long-term unemployed are benefitting. Respondents to the qualitative interviews said trial periods were one of the key government initiatives that had improved their willingness to hire applicants from these groups – due to reduction of risk.
• Eighty percent of employers in the survey reported they had continued employing staff once the trial period had ended. . This is similar to the level found in the 2010 evaluation of trial periods in SME’s.

Background information on the 90-day Trial Period provision

Since 1 April 2011, an amendment to the Employment Relations Act 2000 allows all businesses to hire new employees on a trial period of up to 90 calendar days. Prior to this, employers with fewer than 20 employees were able to use the provision from 1 March 2009.

Under the amendment, the employee, if dismissed within the 90 calendar days, is unable to raise a personal grievance for reasons of unjustified dismissal, but still has the right to protections against discrimination, sexual and racial harassment, duress or unjustified action by the employer that disadvantages the employee. Employees are still able to access mediation, and the principle good faith still applies to the relationship.


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