90-Day Trial Periods And Probation: Short Service Dismissal In New Zealand

Hiring someone new is exciting - but it can also feel risky, especially when you’re a small business and every hire matters.

That’s where tools like a 90-day trial period in New Zealand clause or a probationary period can help. Used properly, they give you a structured way to confirm whether a new team member is the right fit, without locking you into a long-term arrangement from day one.

However, these options don’t mean you can “fire at will”. Even in the early days of employment, you still need to think about process, documentation, and legal risk.

In this guide, we’ll break down how 90-day trial periods and probation work in New Zealand, what “fair process” looks like in practice, and how to protect your business when a new hire isn’t working out.

What Is A 90-Day Trial Period In New Zealand (And Who Can Use It)?

A 90-day trial period is a specific legal mechanism under the Employment Relations Act 2000. It allows an employer to dismiss a new employee by giving notice within their first 90 calendar days, and (if done correctly) the employee can’t raise a personal grievance for unjustified dismissal.

For small businesses, it can be a helpful risk-management tool - but only if you meet the legal requirements. Trial periods are quite technical, and if you get the details wrong, you may lose the protection entirely.

Can Any Business Use A 90-Day Trial Period?

Not always. Eligibility has changed over time, and it’s important to check the current law before relying on a trial period. Under the settings many employers are familiar with, 90-day trial periods are generally available only if you employ 19 or fewer employees at the time the employee starts work.

When counting employees, you typically need to consider your headcount across the business (not just one site), including permanent staff and regular fixed-term employees. For some businesses, “who counts” can get tricky - especially where you use casuals, seasonal staff, or labour hire.

If you’re unsure whether you fall under the threshold (or whether the threshold applies), it’s worth getting advice before relying on a trial clause.

What Makes A Trial Period Clause Legally Valid?

To rely on a 90-day trial period (New Zealand) clause, you usually need to get these fundamentals right:

• It must be in the written employment agreement (verbal trial periods don’t work).
• The employee must sign the agreement before starting work - signing on day one (after they’ve started) can be too late.
• The clause needs to be clear and correctly drafted, including how notice will work.
• The employee must be a “new employee” (for example, you generally can’t use a trial period for an existing employee moving into a new role with you).

This is one reason it’s so important to use a properly drafted Employment Contract - a trial period clause is not something you want to copy from a template and hope for the best.

What Protections Do You Actually Get?

The big benefit is narrow but valuable: if the trial period is valid and you give notice of dismissal within the 90 days (and comply with notice requirements), the employee generally cannot bring a personal grievance for unjustified dismissal.

But they may still be able to raise other types of claims. For example, risks can still arise around:

• discrimination (Human Rights Act 1993)
• harassment or bullying
• retaliation for raising a concern
• breaches of good faith obligations
• wage, leave, or other minimum entitlement breaches (e.g. Holidays Act 2003)

So even with a trial period, you still want to act carefully, communicate properly, and document your steps.

Probation Periods Vs Trial Periods: What’s The Difference (And Which Should You Use)?

Probation and trial periods are often confused - but in New Zealand they work differently, and they protect you in different ways.

Probation Periods (More Common, Less “Automatic” Protection)

A probationary period is essentially an agreement that the employee’s performance will be reviewed closely during an initial period (for example, 3 or 6 months).

Unlike a 90-day trial period, probation does not remove the employee’s ability to bring a personal grievance for unjustified dismissal. That means if you dismiss someone on probation, you still need:

• a substantive reason (e.g. genuine performance issues, misconduct, or another lawful reason); and
• a fair process before making the decision.

The upside is flexibility: probation can be used by businesses of different sizes, and it can be structured to match the role (particularly where it takes time to assess competence).

Trial Periods (Stronger Protection, But Stricter Rules)

A 90-day trial period is more “all or nothing”:

• if it’s set up correctly, it can significantly reduce dismissal risk (for unjustified dismissal claims)
• if it’s set up incorrectly (wrong headcount, signed too late, clause drafted poorly), it may be useless - and you may be exposed to a claim

So Which One Should You Use?

Many small businesses prefer a 90-day trial period where they’re eligible, because it’s designed specifically for early-stage fit assessment.

That said, even with a trial period, you still want to manage performance actively. A “hands-off” approach can create practical and legal problems - for example, if the real issue is discrimination risk, inconsistent treatment, or poor documentation.

Can You “Just Let Someone Go” In The First 90 Days? What Fair Process Still Looks Like

This is the part many employers get wrong: a trial period can reduce one category of legal risk, but it does not remove your wider obligations as an employer.

In New Zealand, employment relationships are governed by obligations of good faith under the Employment Relations Act 2000. In plain terms, that means you and the employee should deal with each other honestly and constructively.

Fair Process Still Matters (Even On A Trial Period)

Even if the employee can’t claim unjustified dismissal, following a fair and transparent process is still a smart move because it helps you:

• reduce the risk of other claims (like discrimination or disadvantage)
• protect your business reputation and workplace culture
• avoid messy disputes that drain time and energy
• show you acted reasonably if the situation is later scrutinised

A fair process (in practical, small business terms) often includes:

• clear expectations from the start (job description, KPIs, behavioural standards)
• regular check-ins and feedback during the first few weeks
• flagging issues early (no surprises at week 11)
• giving the employee a reasonable chance to respond to concerns
• considering any explanations (training gaps, unclear instructions, personal issues, health concerns)
• confirming the decision in writing and paying correct entitlements

If performance is the key concern, aligning your approach with a structured Performance Management Process is often the cleanest way to keep things consistent.

Be Careful About “Short Service” Terminations That Are Actually Something Else

If you’re thinking about a short service dismissal (including during a trial period), make sure the real reason matches the path you’re taking. For example:

• If the role genuinely isn’t needed anymore, this may be a redundancy scenario (and needs consultation and a proper process).
• If the issue is misconduct, you’ll need to manage it as misconduct (not disguise it as “not a good fit”).
• If the issue is medical incapacity, you’ll likely need a careful, health-focused process.

Mixing these up is where employers often get into trouble.

How To Dismiss Someone During A 90-Day Trial Period (Step-By-Step For Employers)

If you’re relying on a 90-day trial period in New Zealand clause, a simple checklist can help you avoid common missteps.

1) Confirm The Trial Period Is Valid

Before you do anything else, check:

• Was the trial period clause in the signed agreement before the employee started?
• Are you eligible to use trial periods (employee headcount and current law settings)?
• Are you still within the 90-day window (count calendar days carefully, and remember it’s notice that needs to be given within 90 days)?

If any part is uncertain, pause and get advice - acting on an invalid trial clause is a fast way to trigger an unjustified dismissal claim.

2) Check The Notice Provisions In The Contract

Even with a trial period, you generally still need to give the notice set out in the employment agreement (unless the agreement lawfully allows otherwise). In practice, this often means you give notice within the 90 days, and the employee’s last day may fall after day 90 depending on the notice period.

If you want the employee to finish immediately, you may be looking at Payment In Lieu Of Notice - but you should only do this if the contract allows it or the employee agrees.

3) Gather Clear, Factual Reasons (Even If You Don’t “Have To”)

You don’t need a courtroom-level brief, but you should be able to articulate clear reasons such as:

• inability to meet role requirements after training
• consistent errors affecting customers or safety
• attendance and reliability issues
• conduct not aligned with workplace policies

A short file note after key incidents and check-ins can make a big difference later.

4) Have A Short Meeting And Let Them Respond

In many cases, a brief meeting is enough. The point is to:

• explain your concerns clearly
• let the employee respond
• consider anything relevant they raise

This helps demonstrate good faith and reduces the risk that the dismissal looks rushed or unfair (even if you’re within the trial period).

5) Confirm The Dismissal In Writing And Pay Final Entitlements

Put it in writing, covering:

• the date notice is given and the last day of employment
• the reason in broad terms (keep it professional and factual)
• final pay details (wages, any owed holiday pay, etc.)
• return of property and access (keys, devices, logins)

If you’re not sure about the wording or process, it’s often worth checking before you send anything - because your letter may be relied on later.

Where you’re not using a trial period (or if there’s any risk the trial clause isn’t valid), you should follow a proper termination pathway like the one outlined in How To Terminate An Employee.

Common Employer Mistakes With Trial Periods And Probation (And How To Avoid Them)

Most disputes about early dismissal don’t happen because an employer acted maliciously - they happen because the business moved quickly, skipped steps, or relied on an assumption that “it’s only the first few weeks”.

Here are some of the most common issues we see.

Getting The Paperwork Timing Wrong

If the employee signs after they’ve started work, your 90-day trial period may be invalid.

A good rule of thumb: aim to send the contract early, encourage the candidate to take independent advice, and have it signed well before day one.

Using A Trial Period When You’re Not Eligible

If your business has grown, or you’ve miscounted staff, you might assume you can use trial periods when you can’t (or when the rules have changed).

This is especially common where businesses scale up quickly, or where staffing is a mix of part-time and casual.

Relying On “Trial Period” To Cover Discrimination Risk

A trial period doesn’t protect you if the dismissal is actually connected to a prohibited ground (like sex, race, disability, family status, religious belief, etc.).

This is also why you should keep your recruitment process clean - questions that seem casual can create real risk. Having a simple checklist for Illegal Interview Questions can help you and your managers stay consistent and focused on the role.

No Feedback Until The Dismissal Meeting

From a people-management perspective, it’s rarely fair (or effective) to stay silent for weeks and then end employment abruptly.

From a legal risk perspective, it can make your decision look pre-determined or unreasonable - and that’s exactly the kind of thing that escalates conflict.

Mixing Up Contractors And Employees

Sometimes the “easy solution” is to bring someone on as a contractor to avoid dismissal risk.

Be careful here. If the person is really an employee in practice, calling them a contractor won’t necessarily protect you - and it can create other liabilities (tax, leave entitlements, and employment claims).

If your workforce includes contractors, make sure you’re using the right documents and classifications, such as a properly drafted Contractor Vs Subcontractor framework and agreement.

Key Takeaways

• A 90-day trial period in New Zealand clause can be a useful tool for small businesses, but only if you meet eligibility requirements (which can change) and the clause is correctly included in a signed agreement before the employee starts.
• Probation and trial periods are different - probation does not stop an employee bringing an unjustified dismissal claim, so you still need a substantive reason and fair process.
• Even during a trial period, you should still act in good faith, communicate concerns, allow the employee to respond, and keep brief records of issues and discussions.
• For trial periods, make sure you give notice within the 90 days and follow the notice requirements in the employment agreement, and only use payment in lieu where it’s legally allowed or agreed.
• Common mistakes include getting the signing timing wrong, miscounting eligibility, giving no feedback, or creating discrimination risk through inconsistent decision-making.
• A tailored Employment Contract and a consistent approach to early performance issues can save you major cost and stress later.

If you’d like help setting up a trial period clause, reviewing your employment agreements, or managing an early termination with the right process, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.