Key Points:

At a time when New Zealanders need to raise their wages to deal with skyrocketing costs of living the National Party is pledging policy that would do the exact opposite, a major trade union says.

The Engineering, Printing and Manufacturing Union's (EPMU) call follows National's confirmation that its small business policy is expected to include a plan to take work rights from workers in their first 90 days of employment, despite this being rejected when they tried to introduce the measure in 2006.

"The biggest challenge facing New Zealand today is to improve living standards by lifting wages and productivity," EPMU national secretary Andrew Little said today.

"Strong work rights give security and a basic level of fairness to New Zealand workers and are an essential condition for lifting wages and living standards.

"There's never been a place in the world or a time in history where living standards and wages rose on the back of eroding work rights, and our past experience here in New Zealand confirms that."

Meanwhile, National's plan has been branded "completely daft" by Prime Minister Helen Clark.

The policy, which will apply to businesses with fewer than 20 workers, allows employers to dismiss staff in the first three months without risking a personal grievance claim for unjustified dismissal.

While probationary periods are already allowed under existing law, proper process must be followed before the worker is dismissed.

Workers can still take a personal grievance if they feel the decision not to keep them on is unfair.

Helen Clark told TV One's Breakfast this morning the Government totally opposed the policy.

"At the moment there is a provision in the law for a probation period for new employees, but you don't lose all your rights," she said.

"This takes away the rights of new employees.

"Workers aren't going to give up a job they've had for a while to go and work for another small employer when they're not going to have any rights," she said.

"They say this is only going to apply to a business with fewer than 20 employees - this is completely daft," she said on TV One's Breakfast programme.

"Unemployment is at 3.6 per cent ... we have to take in tens of thousands of people on work permits because we don't have enough people here to do the work."

Yesterday, National deputy leader Bill English said the policy would give small businesses some insurance so they could take a risk on workers they might otherwise be reluctant to employ, such as former prisoners or people with little work experience.

While large businesses could better deal with underperforming staff, it could have a serious impact on small businesses.

Labour Minister Trevor Mallard said it would lock people into their current jobs, making them less likely to move around the workforce.

"If you're in a well-paid job with security, you're much less likely to leave it to go to another one if you could be fired from it the next day. At the other end of the labour market, it's almost a charter for people to abuse newly appointed, low-wage workers."

The Council of Trade Unions said the policy would allow small businesses to "opt out of fairness in employment".

"National's right to unfairly sack workers would be given to the 96 per cent of all employers who make up small businesses, and could affect up to 200,000 workers every year," president Helen Kelly said.

"Currently all businesses can dismiss workers when it is justified and fair including on day one, but why specifically legalise unfair behaviour it is beyond belief."

Ms Kelly said all the employment policies released by National so far were about removing workers' choice and rights.

However, Doug Alderslade, an employment lawyer at Chapman Tripp, said he expected arbitrary dismissals under such a policy would be rare.

He said most employers put great effort into recruiting staff and were likely to use the provision only where there was a genuine problem.

"Just because employers have the opportunity to terminate doesn't mean it will be used in a ruthless fashion to get rid of people.

"A lot of people will oppose this, saying it will be abused. But that defies economic reality. Employers need someone to work in that job and will be hoping the person they appoint succeeds."

He said dismissing new workers was also a hassle for the employer, who then had to recruit a replacement.

It would make employing easier for smaller businesses which had often struggled to deal with the current probationary period under which staff required monitoring and had to be given areas for improvement before they could be dismissed.

Engineering, Printing and Manufacturing Union national secretary Andrew Little disagreed, saying it would be a major departure from the current law, which gave all workers universal employment rights.

He said many smaller companies did struggle with the requirements of the existing probationary period, but to let them off dealing with it would entrench bad management.

"I'm not sure an answer to that problem is to take away rights. The thing that's most important to workers is to know they can't be tossed out arbitrarily or without the ability to challenge it."

In 2006, National MP Wayne Mapp's bill to introduce a 90-day probationary period for all employees failed at its second reading after the Maori Party decided not to support it.

The bill was strongly opposed by unions, who protested nationwide.

Mr English made the announcement on TVNZ's Agenda, saying the Reserve Bank was predicting unemployment would almost double over the next three or four years to 6 per cent.

Whereas low unemployment over the past few years had made it easier to get a job, that was likely to change.

"The people who are going to get hit hardest by an employment downturn are those at the margins of the workforce."

Mr English said use of the probationary period would be voluntary.

However, Mr Mallard said this was effectively a "Clayton's provision" because bosses were unlikely to employ people who refused to accept the probationary period.

Current law: Can be dismissed within a probationary period but can take a personal grievance claim if they believe the decision is unfair.

National's plan: Small businesses (with fewer than 20 workers) can dismiss a new staff member within 90 days, with no prospect of a personal grievance claim.