For many businesses the loss of the 90 day trial period that the new Labour government have promised will mean a lot of changes to the way they manage staff. Under the current 90 day trial period legislation all employers are able to hire a new employee (provided that they sign their agreement before they start, they haven’t worked for you before and the trial period is in the agreement) and terminate them within their first 90 days of employment without the risk of a personal grievance for unjustified dismissal.
The proposed changes will limit the trial period to only those employers with less than 20 employees. But employers with 21 or more employees cannot use the period anymore. According to research completed by the Employers and Manufacturers Association (EMA) most employers were using the trial period to take a chance on a new employee – sometimes someone they would not have hired otherwise.
So, if you are an employer that is likely to lose your right to use the trial period what can you do instead? The general advice is to revert back to the probationary period. An employee could still raise a grievance for unjustified dismissal under a probationary period so structure is going to be very important.
I suggest that you have a very structured probationary period and you document this in your employment agreements. The clause should have three set review periods (say monthly), set performance targets based on the role and an understanding from the employee that if they do not meet these standards they may be terminated for poor performance.
That may sound quite harsh but as the EMA survey noted 90 of respondent said that they kept their employees on after the trial period and 94% of these employees stayed between 12-18 months with the company.
We will keep a close eye on the new legislation and let you all know what the final bill means for you.
I am sure that you have all seen the press around employers getting the Holiday’s Act 2003 entitlements wrong. The Ministry of Business Innovation and Employment itself identified that they had paid holiday entitlements incorrectly. This week the new Labour government announced that a review would be started into the Holidays Act – thank goodness! The MBIE website states that a new regime is at least 2-3 years away and the new or amended legislation will not absolve employers from compliance with the current Act or remove their responsibility to re-mediate workers for historical underpayments. So even through things may get easier in the future, employers will still need to resolve their current problems.
For a small business, interpreting the Holidays Act is a tough call. Most businesses (including many large businesses) have historically relied on their payroll provider to ensure that calculation of holiday pay and entitlements were correct. Many of these business are now finding that this was a mistake but without the ability to have in-house expertise is an understandable position.
So why is the Act so complicated? It was drafted 15 years ago to reflect what working practices were like at the time. As I am sure everyone is aware, these have changed and it is not uncommon for employees to work flexible hours, days or even work casually for a number of employers. The Act simply cannot be easily applied to these kinds of workers. In addition, it uses different units of measure – days for sick leave, bereavement leave and alternative holidays and weeks for annual leave. This means that your payroll system needs to perform three different calculations in three different units if measure – hours, days and weeks.
If you are a small business and your employees work varying hours and days, you need to make sure that you get some good HR advice on what you should be paying people for their holidays. Remember that if you have paid employee’s incorrectly you have to recalculate their holiday entitlements going back 6 years. This also includes employees that have left the business. This is a huge undertaking and employers are encouraged to get outside assistance in auditing their current payroll practices and assisting with the recalculation if needed.
Tarryn has worked in HR for over 14 years and loves to solve problems. She is a self professed employment relations junkie! She lives in Auckland with her dedicated husband, tireless toddler and three special needs cats.