The 11 per cent of employers that didn’t have this option, employed around 72 per cent of the workforce.
MBIE said the benefits of extending 90-day trials to all employers diminished the larger a business got, and upsides for employers wouldn’t outweigh the “costs of insecurity to a greater number of employees”.
Accordingly, it advised the Government not to change the law.
Trials enable employers to dismiss employees for any reason during their first 90 days of employment. Employees can still bring personal grievances for other matters unrelated to the dismissal, like discrimination, harassment, or being disadvantaged in their employment.
MBIE conceded that because allowing all businesses to use 90-day trials was in the National-Act coalition agreement, as well as the Government’s 100-day plan, it didn’t have much time to analyse the policy.
However, it noted that according to the (discontinued) National Survey of Employers, trial periods were common in 2018/19 when businesses of all sizes could use them.
The survey found 67 per cent of employers with fewer than 20 employees had hired at least one employee with a trial period in the prior year.
It also found 23 per cent of employers that used trials had dismissed an employee during their 90-day trial period.
MBIE also referenced a 2012 Statistics NZ Survey of Working Life, which found recent migrants, Asian and Pacific people and lower wage earners were most likely to start jobs on trial periods.
However Workplace Relations and Safety Minister Brooke van Velden said the extension of 90-day trials would benefit people on whom employers might otherwise be hesitant to take a chance.
“Workers who are just starting out, those who have taken a break from working or people looking to change careers will benefit from this bill,” she said.
“Workers who might be considered risky, with little work experience or a criminal background, will benefit from this bill …
“It only takes one employee with a poor attitude or who simply does not have the skills to perform their duties to take down an otherwise productive team. Ninety-day trials give employers much-needed certainty to make decisions and get ahead.”
However, findings of another study MBIE referenced suggested 90-day trials had little impact on the economy. Researchers from Motu, in a 2016 study, detailed potential reasons for this.
They said the cost of hiring and training someone, only to dismiss them before hiring and training someone else made employers reluctant to let go of staff during trial periods.
They made the point that employers’ hiring decisions are primarily based on their needs, rather than dismissal costs.
Furthermore, there are already a number of ways employers can reduce risks when hiring, such as using casual and fixed-term contracts.
MBIE also made the point all employers can include probation periods in employment contracts.
“A probation period enables an employer to test the suitability of an employee but requires the employer to engage with the employee regularly on their performance until the conclusion of the probationary period,” MBIE said.
“An employee dismissed on a probation period has access to the full suite of legislated employee protections, including unjustified dismissal.”
Van Velden concluded, “Extending the availability of 90-day trials does not mean that all new employees will have trial conditions, rather it provides the option to include trial periods in employment agreements in the future.”
CORRECTION: An earlier version of the story said the advice was provided by the Treasury, but it was actually prepared by MBIE.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
