What you need to know about probationary periods

Probationary employment periods are often viewed as that ‘in between’ time – those few months before a new hire becomes an official part of the team.

But employers have important obligations to employees throughout their probationary period and, if you’re not happy with their performance, you can’t just tell them to leave.

Probationary periods are a tool used by employers to assess whether an employee can do the job. They can apply for new employees, or for existing workers in your organisation who are switching to a new position, such as an accounts assistant who takes on a supervisory role. They should not be confused with 90-day trials, which have different requirements. 

Joshua Kimpton, a Senior Associate at MinterEllisonRuddWatts in Auckland, explains that probationary periods are contractual arrangements. While they can last for any reasonable amount of time, their duration must be recorded in the employment agreement.

“Probationary periods don’t have a maximum duration, but the length of a probationary period should always be proportionate and reasonable in the circumstances,” says Kimpton, "This means the employee must be given sufficient time to perform the various aspects of their role and demonstrate their competency.”

An employer still owes a duty of good faith to an employee during their probationary period. This means if there are any performance issues during a probationary period, employers must follow a fair process to address the performance issues. This includes providing feedback to employees about any issues with their work performance, explaining how their performance can be improved, offering appropriate training and support, and telling them what this may mean for their ongoing employment if the performance issues are not addressed by the end of the probationary period.

A fair process typically involves informal performance management in the first instance, followed by a formal performance improvement process if the performance issues are ongoing. During both informal and formal performance management processes, employees should be provided with support, such as ongoing and appropriate training, instruction, and supervision.

Importantly, you are required to give an employee an opportunity to improve during the probationary period.

Employees on a probationary period have the same minimum rights and entitlements as any other worker under New Zealand Employment Law – and this extends to the dismissal process.

"An employee who is dismissed during a probationary period could raise a grievance about their dismissal if it is substantively unjustified or a fair and proper process was not followed,” says Kimpton.

At the end of the probationary period, if you are not satisfied that the employee is suitable for the job, you are required to:

• show that you have assessed them fairly and given them a reasonable opportunity to improve, with support

• explain why you consider they are not performing to the standard expected of their role

• explain that you propose to end the employment.

You must also give the employee an opportunity to respond to these three points.

The usual employment law grounds for when you can dismiss an employee continue to apply during a probationary period. These include serious misconduct that ‘deeply impairs or is destructive of the relationship of trust and confidence’, or failure to reach the expected standards of performance.

However, Kimpton stresses that you are required to act as any “fair and reasonable employer could in all the circumstances before dismissing the employee”.

“This means the dismissal will need to be substantively justified and a fair and proper process will need to be followed, including proposing dismissal to the employee and seeking and considering their feedback on that proposal," he says.

“If the employee is on a probationary period and they are found to be unjustifiably dismissed, the employer could be liable to pay lost wages or hurt and humiliation compensation, or it could be required to reinstate the employee to their role,” adds Kimpton.

If you are engaging a new employee, Kimpton says you may be able to use a trial period for the first 90 days of an employee’s employment under the Employment Relations Act 2000. If this is the case, your obligations as an employer differ when it comes to dismissals.

“Trial periods have very strict requirements under New Zealand law, both for their use in the initial stages and when it comes to termination of employment. For example, a 90-day trial period is only available for use with new employees who have never worked for the employer before, and they will only have effect where the employee has agreed to it in their employment agreement before starting work.” says Kimpton.

“During a 90-day trial period, an employee can be dismissed and they cannot raise a personal grievance or bring other proceedings in respect of their dismissal. However, this doesn’t give an employer carte blanche not to be a fair and reasonable employer.”

Kimpton says an employee on a 90-day trial period could still bring a legal claim relating to other aspects of their employment.

“For example, if a manager bullies the new employee about their performance, the employee may still have a claim for unjustified disadvantage, even if a subsequent dismissal cannot be challenged,” he says.

Probationary periods provide a valuable opportunity for both an employer and employee to ensure they’ve made the right choice. But, like all stages of employment, you are required to show fair process and give all employees every opportunity to show that they’re fit for the job.

Information provided in this article is general only and it does not constitute legal advice and should not be relied upon as such. SEEK provides no warranty as to its accuracy, reliability or completeness. Before taking any course of action related to this article you should make your own inquiries and seek independent advice (including the appropriate legal advice) on whether it is suitable for your circumstances.