90 Day Trial – a blunt instrument?

The ability for companies to include a 90 day trial period as a clause in their Individual Employment Agreement (IEA) was introduced March 1st 2009 for companies with 19 or fewer staff. This was extended to all New Zealand businesses 1st April 2011.

Current status of trial periods

65.5% of respondents stated they had a trial period clause in their Individual employment agreements (IEA) for new staff; 34.5% said they did not.

Of the organisations that had a trial clause for new staff, 53.8% stated they did not dismiss anybody during this initial period.

Of the organisations that have a trial period in their IEA, on average they dismissed 1.4 employees during the trial period in 2015.

69.3% of organisations with a trial period clause reported that none of their new staff resigned during this period.

Of the organisations that have a trial period in their IEA, on average 1.4 employees resigned during the trial period.

Uptake of 90 day trial period by company size

When considering the size of a company and the uptake of the 90 day trial option there are significant differences.

The turnover survey collects data across 5 company size categories (refer to the  graph below)

For companies below 99 staff it is more likely that they have chosen to incorporate the 90 day trial in their Individual Employment Agreements (IEA)

In the category 100 to 700 staff it is marginally more likely that a company has included a 90 day clause.

For companies above 700 the trend reverses dramatically showing that it is 4.36 times more likely that a large company will not have incorporated the 90 day trial option in their IEA.

The report shows that as company size decreases, there is increased use of the 90 day trial. In fact companies with less than 30 staff were 3 times more likely to use the 90 day period to release staff than companies with over 700 staff.

This concerning finding indicates that smaller companies may be using the 90 period as a recruitment ‘blunt instrument’, and highlights a need to focus more on the quality of the initial recruitment, induction, retention and development processes. This is a real opportunity for smart smaller business owners to improve their recruitment and retention processes and lower their recruitment costs, ensuring the time and effort made employing staff is not wasted.