Probationary Periods

Should we include a probationary period in the employment agreement?

As per our previous article, "90 Day Trial Periods", if you have 20 or more employees you cannot include a trial period in an employment agreement, as an alternative, many employers choose to include a probationary period.  

A probationary period provides an opportunity for employers to assess an employee's suitability for a particular role.

Can we include a probationary period in our employment agreements?

Any employer, regardless of the number of employees they employ, can include a probationary period in an employment agreement. A probationary period is typically for a period of three months but that time can be extended. We would not recommend having anyone on a probationary period for longer than six months. Employers should consider how long is required for them to make a reasonable assessment as to whether the employee is suitable for the role.

An employee who is subject to a probationary period receives the same minimum entitlements as all other employees and is treated the same. At the end of the probationary period, the employer may choose to either end the probationary period and continue the employee's employment, extend the probationary period if they are still making a determination on the employee's suitability for the role or, terminate the employment.

What are our responsibilities during a probationary period?

During the probationary period the employer is still required to follow fair process. An employer should:

• Tell the employee if there are any issues with their work;

• Inform the employee if there is a possibility that their employment may not continue after the probationary period;

• Provide the employee support and relevant training to help them to succeed in the role;

• Allow the employee the opportunity to improve by providing feedback, training and information on what aspects they need to improve in.

What happens if all goes well and we want to keep the employee?

The employer should communicate with the employee that the probationary period has ended and the employee's employment automatically continues as per their employment agreement.

What happens if I want to terminate the employment at the end of the probationary period?

Contrary to common belief, employers cannot terminate employment without due process during a probationary period. The employer has a duty to assess the employee's performance fairly.

The employer must give the employee an opportunity to respond to the employer's reasons for terminating their employment and if, after considering the employee's response, the employer still wishes to terminate the employee's employment, they can do so by providing the requisite notice as recorded in the employment agreement.

Unlike a trial period, if the employee does not believe the dismissal was justified, they can raise a personal grievance for unjustified dismissal.  

Key points to ensure a valid probationary period

There are a few requirements that must be fulfilled for a probationary period to be considered valid. We outline below key points you need to know if you are relying on a probationary period clause.

• The probationary period must be recorded in writing in the employment agreement. The clause must state the length of the period.

• The probationary period must be paid.

• The employer must provide training and guidance on how to conduct the particular role.

• The employer must act in accordance with the duty of good faith.

Our employment team can assist to ensure your probationary period clause is fit for purpose. We also recommend that you seek legal assistance before terminating employment in reliance on the trial period provision.

For more details, please contact:

Melissa Johnston (Partner) on (09) 306 6729 (mjohnston@mcveaghfleming.co.nz)

Hiruni Wijewardhana (Solicitor) on (09) 262 4940 (hwijewardhana@mcveaghfleming.co.nz)

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Employment Law

Written by Melissa Johnston