The Employment Relations Amendment Bill currently before select committee proposes to remove the ability to use trial periods for any employer who employs 20 or more employees.
While trial periods will no longer be available to larger employers if the Bill becomes law, probationary periods are in our view a useful alternative (smaller employers will still have the option of using both).
Is there a difference?
Absolutely – while similar, the two types of clauses are very different. There is real potential for confusion and significant cost if managers don’t keep those differences in mind. In particular, employers need to be conscious that a probationary clause gives them far more limited protection, as compared to a trial clause.
Trial periods are a very powerful restriction on an employee’s rights. If a trial period is properly implemented and applied, then an employee cannot raise a personal grievance for unjustified dismissal.
For that reason trial clauses have been strictly interpreted by the courts.
A trial period:
Notice of termination under a trial period must also be given strictly in accordance with the terms of the employment agreement.
If these requirements aren’t met the trial period won’t be effective, meaning the dismissed employee will almost certainly have a valid personal grievance.
On the other hand, probationary periods are not as powerful. They do not prevent an employee from raising a personal grievance for unjustified dismissal, and an employer must still follow a fair process before making a decision to dismiss under a probationary period.
That means an employer will still need to put an employee on notice if there are concerns about performance and give the employee a real opportunity to respond to those concerns / demonstrate improvement over an appropriate period of time.
The courts have said though that an employee employed on a probationary period should be aware that they are being watched closely and their suitability for ongoing employment assessed. An employer therefore has slightly fewer hoops to jump through to decide an employee is not suitable, and can reach that decision more quickly than would normally be the case.
There are some benefits to a probationary period over a trial period. Probationary periods are not limited to just new employees. A probation period can also be extended (including beyond 90 days), if that is provided for in the employment agreement. This greater flexibility can be useful, for example where a previous employee is returning after an extended period away.
To prepare for the new legislation or to find out more about probationary periods please contact our employment law team.