Key Points:

New workers in small businesses can be sacked within 90 days of starting their jobs under a law passed today.

The probation period may be extended to larger firms in future.

Labour Minister Kate Wilkinson said the Employment Relations Amendment Act would encourage small businesses - with 20 or fewer workers - to take a risk and hire more staff knowing they would not be caught up in expensive and time consuming personal grievance processes if the person was not right for the job.

The bill was passed under urgency, meaning there was no select committee process where views could be heard and changes made - Ms Wilkinson said fast action was needed because of tough economic times. A similar bill put up by National's Wayne Mapp had been well canvassed, she said.

However, Labour says the bill strips rights and will open workers up to abuse.

The new law is effective from March after the Government agreed to an Act Party amendment to bring it forward by a month.

"This bill is a win-win for employers and employees, it is not about taking away rights," Ms Wilkinson told Parliament this morning.

"It is about giving opportunities."

She said mediation was available and protections against discrimination remained.

"It gives businesses the confidence to take on new employees. This bill dramatically reduces compliance costs for small to medium businesses associated with recruitment and dismissive."

Bad employers were unlikely to abide by rules anyway, she said.

Labour's Lianne Dalziel said compliance costs increased in Britain when a similar move was done.

More employment cases would be taken on discrimination grounds as workers tried to get their rights. Often it was cheaper to agree to a settlement.

Labour's Trevor Mallard criticised the Government for refusing amendments to give people notice in writing and for them to be told the reason for their sacking. The Government also refused an amendment to exclude schools.

He said most employers would treat people fairly, but there were "scumbag employers" who would abuse it.

Protections were useless if people did not know why they were sacked and, if not backed up with legal enforcement, were toothless.

Green MP Sue Bradford said the law was an affront to workers. About 100,000 at any time would be under probation.

Ethnic workers and the most vulnerable - such as migrants unfamiliar with their legal rights - would be worst affect.

Ms Wilkinson has said beneficiaries who lose their jobs under the probation period would not face a stand down period for benefits, but Ms Bradford said that would not help other workers who had not been on welfare before taking the job.

Act's David Garrett said the left was scaremongering and there was no advantage for employers to sack good workers.

The Maori Party, which has a support agreement with National, is also opposing the bill, saying it would hurt Maori and Pacific workers.

Unions were outraged by the bill and EPMU was to petition Governor General Anand Satyanand today, asking he delay or refuse royal assent.

That won't happen but was indicative of opposition to the change and the rushed process.

Business groups welcomed the change.

Business NZ chief executive Phil O'Reilly said most developed countries had similar policies.

"Most important, we are facing an economic downturn when jobs are most at risk and small businesses are least likely to hire," he said.

"It is a pro-worker policy. The least skilled, most marginal employees - currently most at risk of not gaining jobs - will get the most benefit from it."

The bill passed by 63 votes to 51 with National, Act and United Future in favour.