March 2006
Probationary period would help more into jobs
The Employment Relations (Probationary Employment) Amendment Bill would help more people find jobs, says Business NZ
Chief Executive Phil O’Reilly. He says employers can be reluctant to employ people without a previous positive
employment record, and the proposed legislation would help overcome the risks of doing so.
Mr O’Reilly says it would benefit teenagers whose unemployment rate is much higher than the national average, new
migrants whose skills are often not well used, and other groups whose unemployment rates exceed the average.
“Currently, many employers are nervous of the risk if the employment doesn’t turn out. Many small businesses have faced
‘unjustified dismissal’ claims following the termination of employment of a fairly new employee. Often this is where
someone has been hired in good faith, but where the employment relationship didn’t work out - where it turned out that
there was not a good fit between the new employee and the workplace, where motivation, behaviour or work habits were not
appropriate, or where work output was below expectations. This is something that is hard to predict in advance.
“An employer may have to find extra resources to turn the situation around, as well as to have that person’s job done by
someone else. In that situation, an employer may need to consider dismissal, because the costs involved are just too
great.
“The process for dismissal is quite complicated. A small business owner with little knowledge of employment law could
quite easily get one of the steps wrong, and become liable for an ‘unjustified dismissal’ claim because of a procedural
mistake.
“With an increasing number of grievance claims using a lawyer or other advocate on a ‘no win, no pay’ contingency basis,
this has a significant impact. The costs to defend against the claim can be large, while with a contingency fee
arrangement, the ex-employee faces no costs if the case is lost, and gains a lump sum if it wins. The contingency fee
arrangement can also encourage the lawyer or advocate to adopt an unduly aggressive attitude towards the case and to
seek higher than justified damages.
“In this situation, many small employers settle out of court, even if the claim is flimsy or based on a procedural
mistake. They may have already paid a lot of money because of the extra costs incurred during the period of employment,
and can’t afford to lose more money and time.
“The Bill would bring a probationary period of 90 days where the ‘unjustified dismissal’ rule would not apply. This
would help discourage the grievance ‘industry’ that seems to be building up in this area, and would encourage more
employers to take the risk of employing those currently underrepresented in the workforce. Probationary periods are
widely used overseas for this reason,” Mr O’Reilly said.
ENDS