Probationary Periods – Quick Guide for N.Z Employers
There is a legal distinction between 90-Day Trial Periods and Probationary Periods – they are not the same. Employers must understand the distinction between each before using a 90-Day Trial Period, or a Probationary Period. Refer to Employer Pro’s separate employer-focused article for more information about trial periods.
A fair and documented employment process is required to terminate employment under a Probationary Period. Employer decisions in terms of ending an employee’s employment under a Probationary Period are more easily challenged via a personal grievance claim for unjustified dismissal. This is because a Probationary Period does not preclude this type of legal claim like a 90-Day Trial Period does.
Accordingly, an employer must ensure a formal employment process is implemented prior to terminating an employee’s employment under a Probationary Period – unlike a 90-Day Trial Period, which does not require a formal process prior to ending employment.
Employer Pro has an Employer Toolkit available for on ‘Probationary Periods’, including more detailed information about Probationary Periods, including a comprehensive employer-focused eBook about managing ’90-Day Trial and Probationary Periods’.
What Is a Probationary Period?
Probationary periods are commonly used by New Zealand employers to support new employees settling into a role, moving roles, evaluate performance and fit, and manage risk.
Probationary periods:
Can be of any reasonable length (often 3–6 months), depending on the job.
Must be in writing and included in the employment agreement.
Do not limit the employee’s right to challenge a dismissal as unjustified.
Require that usual employment law protections apply, including good faith and procedural fairness.
Should be clearly explained to the employee at the time the employment agreement is offered.
What Does the Law Say About Probationary Periods?
Section 67 of the Act provides the legislative framework for Probationary Periods, which states:
A Probationary Period must be specified in writing in the employee’s employment agreement.
Does not affect the law relating to claims of unjustified dismissal where an employee is dismissed under a Probationary Period, irrespective of what is specified in the Probationary Period.
Probationary Periods are more flexible to implement in contrast to 90-Day Trial Periods, but an employee who is employed under a Probationary Period has the same legal rights and protections as other employees.
In summary, a Probationary Period offers significantly reduced legal protection compared to a 90-Day Trial Period since employees can raise claims for unjustified dismissal.
Managing a ‘Fair Process’ Under a Probationary Period
In the event of performance concerns, a formal process to manage an employer’s concerns during a Probationary Period would be through a formal performance management process, or PIP, with a truncated or reduced procedure for managing progressive warnings, e.g., an advancement straight to a final warning for substandard performance after implementing a PIP, rather than a first written warning and so on.
A shorter overall timeframe to manage an end-to-end formal employment process is permissible under a Probationary Period, but a fair and formal process is still required prior to terminating an employee’s employment.
In the event of misconduct concerns, then a formal disciplinary process may need to be considered by the employer, including issuing a warning in accordance with the procedure above, i.e. an advancement straight to a final warning after the conclusion of a fair disciplinary process and continued disciplinary procedures if misconduct issues continue.
That said, the ability to advance straight to a final warning during a Probationary Period will also depend on how the Probationary Period clause in an employee’s employment agreement is drafted. When implementing a Probationary Period, an employer should always ensure sound drafting of any corresponding contractual provisions contained in the employee’s employment agreement, including operative timeframes and the procedure for managing formal warnings during a Probationary Period.
Refer to Employer Pro’s comprehensive Employer Toolkits on ‘Managing a Performance Management Process’ or ‘Managing Investigations, Suspensions & Disciplinaries’ for more information, including our range of employer-focused step-by-step guidelines, template letters and documents, practical commentary, and more.
Tips for Employers Managing a Probationary Period
To reduce legal risk:
Draft a clear probation clause that outlines expectations and procedures that apply during the probationary period.
Set clear performance standards from day one and document them.
Hold regular feedback discussions with the employee and document outcomes.
Provide training, support and resources to help employees meet expectations.
Warn employees if there are concerns and give them a chance to respond. Implement the correct and formal employment process.
Document all meetings and decisions carefully to support your justification for action. Ensure standard ‘procedural fairness’ considerations are correctly managed if a formal employment process is required to address concerns.
Seek professional supportfor complex or sensitive cases early, if necessary.
Employer Takeaways
While a Probationary Period provides a useful tool to an employer to assess an employee’s suitability, caution must be exercised during a Probationary Period. This includes the employer implementing the correct formal employment process to address any concerns associated with an employee who is employed under a Probationary Period.
A fair, documented, and thorough employment process must be implemented before an Employer ends the employment of an employee under a Probationary Period. If an employer fails to ensure a fair and adequate process to address concerns during a Probationary Period, then it can expose itself to legal risk and protracted employment disputes.
Compliance Warning
A Probationary Period does not protect an employer against claims for unjustified dismissal. This means an employer must implement a formal employment process to address any concerns that arise in relation to an employee employed under a Probationary Period before termination. The importance of managing ‘fair process’ requirements during a Probationary Period should not be underestimated by an employer.
If an employee is dismissed under a Probationary Period, then they can raise a personal grievance claim for unjustified dismissal and the employer will be required to establish that the dismissal was justified, including whether a fair, thorough and documented employment process was implemented when managing termination of employment.
The importance of an employer’s process used to address any concerns under a Probationary Period will be critical to the employer’s defence and corresponding litigation strategy in the event of a subsequent legal dispute.
This article is provided for general information only and does not replace professional advice. Employers should seek advice specific to their circumstances from Employer Pro before implementing or relying on a Probationary Period, including managing termination of employment. Employer Pro has a range of employer focused resources and services available through our competitive Employer Protection Packages.
Employer Pro Limited – Empowering Employers Through Effective People Solutions
