Dismissing an Employee During a Trial Period in New Zealand

Letting someone go during a trial period can feel straightforward, but this is where many New Zealand businesses get caught. Common mistakes include putting a trial clause into the contract after the employee has already started, using a trial period for an employee who is not genuinely a new hire, and assuming a valid trial clause means you can skip a fair process altogether. Those errors can turn what looked like a simple dismissal into a personal grievance risk.

If you are hiring your first worker, scaling quickly, or cleaning up old template contracts, you need to know exactly when a trial period works and when it does not. The law in this area is technical, and small wording or timing problems matter.

This guide explains what dismissal during trial period means for New Zealand businesses, what must be in the employment agreement before you sign, the process issues to think about before ending employment, and the common traps employers fall into.

Overview

A trial period can limit an employee's ability to bring a personal grievance for unjustified dismissal, but only if the legal requirements are followed carefully from the start. If the clause is invalid, or the process around dismissal is mishandled, your business may still face claims and cost.

• The employee must be a genuine new employee of the business.
• The trial period clause must be in the written employment agreement before the employee starts work.
• The employee must have signed the agreement before starting work.
• The clause should clearly state the length of the trial period, up to 90 days.
• The business still needs to act in good faith and follow the agreement.
• The employee may still be able to raise other claims, even if they cannot bring an unjustified dismissal grievance.

What Dismissal During Trial Period Means For New Zealand Businesses

A valid trial period gives an employer more room to end employment in the first 90 days, but it is not a free pass to ignore the contract, basic fairness, or good faith obligations.

In New Zealand, a trial period is usually used when an employer wants to assess whether a new employee is the right fit for the role. If the clause is enforceable, and the employer dismisses the employee within the trial period, the employee generally cannot bring a personal grievance for unjustified dismissal.

That protection is narrower than many employers think. A trial period does not wipe out every legal obligation. It does not automatically protect a business from claims about discrimination, harassment, unpaid wages, breach of contract, or failures to deal honestly and openly with the employee.

What makes a trial period different from a probationary period?

A trial period and a probationary period are not the same thing. This distinction matters before you sign an employment contract.

A probationary period usually allows the employer to monitor performance for a set period, but the employee still keeps the usual right to challenge a dismissal. If you dismiss someone during probation without proper justification and process, they may still bring a personal grievance for unjustified dismissal.

A trial period, if validly included and used, can limit that specific unjustified dismissal claim. Because of that, the legal requirements for trial periods are strict.

Who can use a trial period?

A trial period is generally available only for a new employee who has not previously worked for the employer. This is where founders often get caught when they try to reuse a clause from an old template.

You usually cannot rely on a 90 day trial period for someone who is already employed by the business, even if they are changing roles. The same caution applies if the person has already been working informally, doing paid trial shifts, or started work before the paperwork was finalised.

Before you hire your first worker, or before you move a casual arrangement into a formal role, check whether the person is truly a new employee for trial period purposes.

What does dismissal during trial period usually look like?

Dismissal during trial period often arises in practical founder moments, such as:

• the employee cannot perform the core tasks of the job after initial training
• attendance or punctuality issues appear in the first few weeks
• conduct problems affect customers, staff, or operations
• the employee is not a suitable fit for a small team environment
• the role turns out to be materially different from what the business needs

Even in those situations, the business should not treat the employee as disposable. A rushed conversation, a surprise termination, or a decision made without checking the contract can create avoidable risk.

What protection does the employer actually get?

The main benefit is limited exposure to an unjustified dismissal grievance, if the trial period is legally valid and the dismissal happens within that period. For many SMEs, that makes hiring less daunting.

But the protection has limits. An employee may still have grounds to challenge related issues, especially where the employer has acted inconsistently with the employment agreement, failed to pay entitlements, behaved in bad faith, or taken action for a prohibited reason.

That is why dismissal during trial period is best treated as a technical contract review and process issue, not just a people management issue.

Legal Issues To Check Before You Sign

The enforceability of a trial period usually turns on what happened before the employee started work, not just what happened on dismissal day.

If you want to rely on dismissal during trial period, your first job is getting the employment agreement right. Timing, wording, and onboarding steps all matter.

The clause must be in writing and signed before work starts

This is one of the biggest legal pressure points. If the employee starts work before signing the agreement containing the trial period, the clause may be invalid.

That can happen easily in a fast-moving business. A founder agrees terms over the phone, the employee starts on Monday, and the signed contract comes through on Tuesday. If the trial clause was not signed before work began, the employer may lose the protection it expected.

Before you sign, and before the employee turns up for day one, make sure:

• the employment agreement is complete
• the trial period clause is clearly included
• the employee has had a fair chance to review the agreement and get advice
• the agreement is signed by both sides
• the employee has not already started any work

The employee must be genuinely new

You cannot usually apply a trial period to someone who already works for you. This includes cases where the person has been working without a proper written contract and you later try to paper the arrangement.

It can also be risky where the worker has already done paid work for the business under another label. Calling it a trial shift or a casual start does not necessarily fix the issue if the person has already become an employee in substance.

Before you classify someone as a new hire for trial purposes, look at what has already happened in practice, not just what your template says.

The trial period wording needs to be clear

The clause should say that the employee will be on a trial period and state how long it lasts, up to a maximum of 90 days. It should also make clear the effect of the clause, including the limit on bringing a personal grievance for unjustified dismissal.

Vague drafting creates arguments. If the clause is muddled, inconsistent with other parts of the agreement, or copied from an overseas template, it may not do what the business expects.

A well-drafted employment agreement should also align the trial clause with the rest of the contract, including notice, duties, hours, pay, and any performance expectations.

Good faith still matters

A valid trial period does not remove the duty of good faith. Employers in New Zealand must still deal with employees honestly, openly, and without misleading or deceiving them.

In practice, that means you should not pretend performance is fine if you are already planning dismissal. You should not rely on hidden reasons, change the story after the fact, or spring contractual terms on the employee that were never explained.

Good faith is also relevant before you sign. Give the employee a real opportunity to read the agreement, ask questions, and seek advice.

Notice and final entitlements still apply

Even where dismissal during trial period is available, the employer still needs to follow the notice provisions in the agreement unless there are lawful grounds for summary dismissal. Final pay, accrued holiday pay, wages, and other entitlements must be handled correctly.

Founders sometimes focus heavily on whether the trial clause is valid and forget the payroll and record-keeping side. That can create a separate dispute even where the dismissal itself was otherwise managed properly.

Keep records from the beginning

Good records help show that the clause was validly agreed and that the business acted consistently with the contract. Keep signed agreements, onboarding communications, notes of performance concerns, meeting records, and termination letters.

If there is later disagreement about when work started or what was said, the absence of records can hurt the employer.

Common Mistakes With Dismissal During Trial Period

The most common mistakes are timing mistakes, drafting mistakes, and process mistakes. Small businesses often make them because they are moving fast, not because they intended to cut corners.

Letting the employee start before the agreement is signed

This is probably the most frequent and costly mistake. If the employee starts work before signing a compliant agreement with the trial clause, the clause may not be enforceable.

This includes practical situations such as:

• the employee attends induction before signing
• they complete paid training before the agreement is finalised
• they start answering emails, serving customers, or doing admin tasks early
• the business sends the contract after the start date

Once work has begun, it may be too late to insert a valid trial period.

Using the wrong clause for the wrong worker

Employers sometimes confuse a probationary period with a trial period, or use a contract template that mixes the two concepts. That creates uncertainty at exactly the point where the business wants certainty.

If your contract says the employee is on probation but does not clearly create a lawful trial period, you should not assume you have the protection against an unjustified dismissal claim.

Assuming no process is needed

A trial period reduces one type of claim, but it does not mean you should dismiss someone carelessly. A short meeting with no explanation, no opportunity to respond, and no reference to the contract may still create problems.

A sensible approach before ending employment usually includes:

• checking the signed agreement and confirming the trial period dates
• reviewing the employee's start date and whether any earlier work was done
• identifying the reasons for the proposed dismissal
• meeting with the employee and explaining the concerns
• allowing them to respond, where appropriate
• making a decision in line with the contract
• confirming notice and final pay arrangements in writing

The exact process may vary depending on the situation, but a considered process is safer than assuming the clause does all the work.

Dismissing after the trial period has expired

Timing matters. If the dismissal takes effect outside the trial period, the employer may not be able to rely on the clause.

Do not leave this until the last minute. Check the contract wording, calculate the dates carefully, and make sure any notice is given and takes effect within the relevant period if that is what the clause requires in context.

Poor communication during the first 90 days

Some employers stay silent about concerns and then terminate abruptly. That approach can look unfair and inconsistent with good faith.

In a small business, regular feedback is not just good management, it is also practical risk control. If an employee is struggling, raise it early, give examples, and keep a brief written record.

Relying on verbal promises or informal deals

If a founder told the employee something inconsistent with the written agreement, or promised that the trial period would not really be used, that can complicate matters. Verbal assurances often become the centre of a later dispute.

Before you rely on a verbal promise, bring the arrangement back to the written terms and confirm the position clearly.

Missing other legal risks

Sometimes the real issue is not the trial period at all. A dismissal may overlap with other legal concerns, such as:

• a discrimination allegation
• retaliation after the employee raised a health and safety concern
• incorrect wage or leave payments
• misclassification of the worker's status
• inconsistencies between the contract and what happened in practice

This is where founders often get caught. They focus on the 90 day clause and miss the surrounding employment law issues that can still lead to liability.

A practical example

A café hires a barista and sends the employment agreement on Sunday night for a Monday start. The barista works the Monday breakfast shift, signs the agreement on Monday afternoon, and is dismissed three weeks later for poor performance. The employer assumes the trial period applies because the agreement says 90 days.

The problem is that the employee had already started work before signing. That may make the trial period unenforceable. If the business then also handled the dismissal casually, without checking notice or documenting the reason, the risk grows.

The better approach would have been to finalise and sign the contract before the first shift, then manage concerns consistently during the trial period and document the termination properly if the role was not working out.

FAQs

Can I dismiss an employee during a trial period without giving a reason?

You should still have a genuine reason and handle the conversation carefully. A valid trial period may limit an unjustified dismissal grievance, but it does not mean the business should act arbitrarily or in bad faith.

Does a 90 day trial period apply automatically to new employees?

No. It must be included in the written employment agreement, and the agreement must be signed before the employee starts work.

Can an employee still bring any claim if dismissed during a valid trial period?

Yes. The limit usually relates to an unjustified dismissal grievance. Other claims may still be available, depending on the facts, such as discrimination, wage issues, or breach of contract.

What if the employee did one shift before signing the contract?

That can be a serious problem for the enforceability of the trial period clause. Even a short period of work before signing may undermine the employer's ability to rely on the clause.

Should I use a trial period or a probationary period?

That depends on the role, the worker's status, and how much protection and flexibility the business is seeking. The key point is not to mix the concepts or assume they work the same way.

Key Takeaways

• A dismissal during trial period can reduce unjustified dismissal risk, but only if the trial clause is legally valid.
• The employee must be a genuine new employee, and the written agreement with the trial clause must be signed before any work starts.
• A trial period is different from a probationary period, and the wrong contract wording can leave your business exposed.
• Good faith, notice obligations, final pay, and accurate records still matter even during a valid trial period.
• Common employer mistakes include late signing, poor drafting, casual dismissal processes, and missing other employment law issues around the termination.
• Before you sign, and before you hire your first worker, it is worth checking that your employment agreement and onboarding process line up with New Zealand law.

If you want help with employment agreement drafting, trial period clauses, termination process questions, or final pay obligations, you can reach us on 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.