90-Day Trial Periods And Dismissal Rules In New Zealand

Hiring can feel like a big leap for a small business. Even if you’ve interviewed well and checked references, you won’t truly know how someone performs until they’re on the tools (or on the floor, in the office, or dealing with your customers).

That’s where a 90-day trial period can be a useful option for eligible New Zealand employers - but only if you set it up correctly from day one. If you don’t, the “trial” might not be legally effective, and you could end up managing a termination the hard way.

Below, we’ll walk you through how 90-day trial periods work in NZ, what you must do to use them properly, and how dismissal during a trial period should be handled to help protect your business.

What Is A 90-Day Trial Period (And What Does It Actually Do)?

A 90-day trial period is a specific legal arrangement under New Zealand employment law that allows an eligible employer to dismiss a new employee within the first 90 days of employment, with limited ability for the employee to raise a personal grievance for unjustified dismissal - provided the trial period is validly agreed and applied.

In practical terms, it’s designed to give small employers more confidence to hire by reducing the legal risk if the hire doesn’t work out early.

What A 90-Day Trial Period Does Cover

• It can limit an employee’s ability to bring a personal grievance (PG) for unjustified dismissal if you dismiss them during the trial period and you have complied with the legal requirements.
• It applies only to the employee’s first 90 days of employment (and only if the clause is valid and properly implemented).

What A 90-Day Trial Period Does Not Cover

This part is important: a trial period is not a “free pass” to do whatever you like.

• Employees may still be able to raise personal grievances for other reasons (for example, discrimination, harassment, or other unlawful treatment).
• You still need to comply with your obligations to act in good faith under the Employment Relations Act 2000.
• You must still follow what the employment agreement says about notice and final pay.

So while a 90-day trial period can reduce one major risk area (an unjustified dismissal claim), it doesn’t remove your wider employment law obligations.

When Can You Use A 90-Day Trial Period In NZ?

Not every employer can use a 90-day trial period, and not every “new hire” will qualify.

1) Your Business Must Be Eligible (Small Employer Threshold)

In NZ, trial periods are generally only available if, at the time the employee starts work, you have 19 or fewer employees.

Working out employee numbers isn’t always as simple as it sounds (for example, if you have casual staff, variable hours, related entities, or multiple locations). If you’re close to the threshold, it’s worth getting advice before relying on a trial period clause.

2) The Employee Must Be A “New Employee” For Your Business

A 90-day trial period is intended for a genuinely new employment relationship. If someone has already been employed by you before, you generally can’t “retrial” them by re-hiring and adding a fresh trial clause.

Also, if the person has previously worked for you in another capacity (for example, as a contractor, casual worker, or through a labour hire arrangement), whether they qualify as “new” for trial period purposes can depend on the facts. If you’re unsure, it’s worth getting advice before relying on a trial period clause.

3) The Trial Period Must Be Properly Agreed Upfront

This is a common trap: a trial period must be agreed in writing and before the employee starts work.

If the employee starts (even for a short “trial shift”) and then you give them an agreement to sign, the clause may be unenforceable.

Getting the fundamentals right in your employment contract is often what makes the difference between a clean, low-risk trial period and a messy dispute later.

How To Set Up A 90-Day Trial Period Properly (Step-By-Step)

If you want to rely on a 90-day trial period, you need to set it up correctly from the start. Here’s a practical checklist you can follow.

Step 1: Confirm You’re Under The 20-Employee Threshold

Before you offer the role, check your headcount at the time the employee will start. If your business is growing quickly, consider what happens if your numbers change - eligibility is assessed at the employee’s start date, not later.

Step 2: Put The Trial Period In Writing (In The Employment Agreement)

Your agreement should clearly state:

• that a trial period applies;
• the duration (up to 90 days);
• that the employee cannot bring a personal grievance for unjustified dismissal if dismissed during the trial period; and
• the notice period that applies (because notice still matters).

Generic templates are risky here. A clause that’s unclear, inconsistent, or missing key wording can make the trial period ineffective - and you might not find out until you’re already in a dispute.

Step 3: Ensure The Employee Signs Before They Start Work

Don’t leave this until the first day “when they pop in to do induction”. If the employee starts work before signing, the trial period may not be valid.

As a practical process:

• send the employment agreement early;
• encourage the employee to take independent advice if they want to; and
• get the signed agreement back before their start date (and keep a copy on file).

Step 4: Track The Dates Carefully

Make sure you have a clear record of the employee’s start date and when the 90-day period ends. If you dismiss after the 90 days, you may no longer be able to rely on the trial period protections.

Also remember: the trial period is “up to” 90 days - you can set a shorter period if you want, but you shouldn’t try to extend it beyond the maximum.

Step 5: Set Expectations Early (Even During A Trial)

A trial period works best when it’s paired with good onboarding and clear expectations.

• Provide training and supervision that’s appropriate for the role.
• Give the employee role KPIs or performance standards (even if they’re simple).
• Have regular check-ins early (for example, after week 1, week 2, week 4).

Even though the employee can’t usually raise an unjustified dismissal claim if a valid trial period applies, setting expectations and documenting feedback is still a smart way to reduce risk and avoid misunderstandings.

How Does Dismissal Work During A 90-Day Trial Period?

If things aren’t working out, you may be able to dismiss the employee during the 90-day trial period - but you still need to do it carefully.

You Still Need To Give Notice (And Follow The Contract)

A trial period doesn’t mean “instant termination”. Most employment agreements require notice (for example, 1 week or 2 weeks), and you’re generally expected to follow those terms.

If you want the employment to end immediately, you may need to consider payment in lieu of notice (where permitted by the employment agreement) so the employee receives the pay they would have earned during the notice period.

Final Pay Still Needs To Be Correct

When you dismiss an employee during a trial period, you still need to get final pay right, which may include:

• wages up to the termination date;
• any notice period pay (or payment in lieu if applicable);
• any accrued but untaken annual holiday pay (paid out in the final pay);
• other contractual entitlements (if any).

Small payroll mistakes can turn into bigger disputes than they need to be, so it’s worth checking carefully.

Do You Have To Follow A Full Disciplinary Process?

Even during a 90-day trial period, you should still act fairly and in good faith. While a valid trial period can prevent a personal grievance for unjustified dismissal, it doesn’t remove the risk of other claims (for example, discrimination or disadvantage) - and poor process or unclear reasoning can still create problems.

As a practical middle-ground, many employers use a “light-touch but fair” approach, such as:

• meeting with the employee to explain the concerns;
• giving them a reasonable opportunity to respond;
• considering whether extra training/support is appropriate; and
• confirming the outcome in writing.

If your concerns relate to performance or conduct and you’re unsure how much process is “enough”, it’s worth getting advice early - especially if the situation could overlap with protected grounds (for example, health issues, disability, pregnancy, family responsibilities, etc.).

In more complex situations, having a proper performance management process can still be the safest approach, even inside the 90 days.

Put The Termination In Writing

You’ll usually want a short termination letter that confirms:

• the employee is being dismissed during their trial period;
• the termination date and notice arrangements;
• final pay details; and
• return of company property and system access.

If you’re not sure what to include, or you’re worried about risk, getting support with how to terminate an employee can help you avoid the common missteps that trigger disputes.

Common Mistakes With 90-Day Trial Periods (And What To Do Instead)

Most trial period problems aren’t caused by bad intentions - they come from rushed hiring, recycled documents, or misunderstandings about what a 90-day trial period actually does.

Mistake 1: The Employee Starts Before Signing

This is one of the biggest (and most avoidable) issues. If the agreement isn’t signed until after the employee starts, the trial period clause may not be enforceable.

What to do instead: build “signed agreement received” into your hiring checklist as a hard stop before any work begins.

Mistake 2: Assuming You Can Dismiss For Any Reason

A valid trial period reduces the risk of an unjustified dismissal claim, but you still can’t dismiss someone for unlawful reasons (for example, discrimination), and you still have to act in good faith.

What to do instead: keep your decision-making objective and document legitimate business reasons (like performance gaps, reliability issues, or conduct concerns).

Mistake 3: Getting The Employee Count Wrong

If you’re not eligible to use a 90-day trial period (for example, you have 20+ employees at the start date), the clause won’t protect you the way you expect.

What to do instead: if you’re near the threshold, get advice on your structure and headcount. It’s usually cheaper to clarify this early than to defend a claim later.

Mistake 4: Using A Trial Period As A Substitute For Good Management

It’s tempting to rely on the trial period as a “safety net”, but your best protection is still good hiring and management practices.

What to do instead: set clear expectations, train properly, and give early feedback. If you later need to terminate, you’ll be in a much stronger position.

If A Trial Period Isn’t Right, What Are Your Options?

Depending on the role and your business, you might consider other tools such as:

• Probationary periods (different to trial periods and generally require a fair process before termination);
• Fixed-term agreements (only if there is a genuine reason based on reasonable grounds for the fixed term); or
• Ongoing employment with clear KPIs and a structured review process.

Because each option has its own legal rules and risk profile, it’s worth speaking to an employment lawyer before you lock anything in - especially if you’re hiring your first employee or expanding quickly.

Key Takeaways

• A 90-day trial period can help eligible NZ small businesses hire with more confidence, but it must be set up correctly to be effective.
• You generally need to have 19 or fewer employees at the time the new employee starts work for the trial period regime to apply.
• The trial period must be in writing and the employee must sign the employment agreement before starting work - otherwise the clause may be unenforceable.
• Even during a trial period, you still need to comply with good faith obligations and you still can’t dismiss for unlawful reasons (like discrimination).
• If you dismiss during the trial period, you usually still need to provide notice (or consider payment in lieu if the contract allows) and ensure final pay is correct.
• Trial periods work best alongside clear expectations, good onboarding, and documented feedback - not as a replacement for proper people management.

This article is general information only and does not constitute legal advice. If you’d like advice about your specific situation, you should speak to a lawyer.

If you’d like help putting the right trial period clause in place, reviewing your employment contract, or managing a termination process, we’re here to help. You can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.