90 day probation for small businesses

It is good to see National confirm a policy of allowing a 90 day probation period for new employees, if the employer is a small business with under 20 staff. think it is well targeted at small businesses as they can be crippled by a bad employee, and do not have the recourse to inhouse lawyers that larger businesses may have.

One will hear a lot of hysteria about this policy from the usual sources, despite the we are almost the only country in the developed world which doesn’t already have such a policy. Let’s look at the reality of small businesses and employees.

First of all, employers do not like losing staff generally. It costs a lot of money to recruit a staff member, and takes some time for them to gain experience and be as productive as they can be. So any hysteria about how employers will sack staff every 90 days so they never have a workforce with full employment rights is wild eyed fanaticism from people who had no idea how being an employer really works. Employers generally want to retain staff.

However sometimes a new staff member does not work out. No matter how much you interview someone or check references, some people are just manifestly unsuitable for a job they have gained. And you sometimes never find this out until they are in the job and it becomes clear.

In a small business, one sub-standard staff member can threaten the viability of the whole business. In the mid 1990s worked at such a small business and margins were razor thing. The owners often took home less pay than the receptionist. And we did have one new employee who did not generate the revenue needed to cover his/her salary, with the result being it almost pushed the firm under.

After that we were very hesitant about taking on more staff, because it was so difficult to extract yourself if it did not work out. Sure the big employers can just pay them out with three to six months compensation, but you can’t afford that as a small business. And few small business owners can afford to spend the best part of six to twleve months going through the process needed to legally dismiss someone. It is in very difficult to dismiss someone just because they are not up to the job – as opposed to misconduct.

As said at the beginning, an employer is going to be pretty hesitant to get rid of an employee in the 90 day period. It is costly to have to recruit a replacement and train them up. So such dismissals will be the exception, not the rule. As an employer you’d have to be pretty convinced that the employee is just not going to work out, to let them go so soon. And once the 90 days are up, they have the normal full employment rights.

With the economy heading into a likely recession, and unemployment tipped to reach 6%, one wants to make it more attractive for small businesses to take a risk and offer someone a job. A 90 day probation period for these small businesses will make it less risky to do so.

Some wise word from Doug Aldersdale at Chapman Tripp:

However, Doug Alderslade, an employment lawyer at Chapman Tripp, said he expected arbitrary dismissals under such a policy would be rare.

He said most employers put great effort into recruiting staff and were likely to use the provision only where there was a genuine problem.

“Just because employers have the opportunity to terminate doesn’t mean it will be used in a ruthless fashion to get rid of people.

“A lot of people will oppose this, saying it will be abused. But that defies reality. Employers need someone to work in that job and will be hoping the person they appoint succeeds.”

He said dismissing new workers was also a hassle for the employer, who then had to recruit a replacement.

It would make employing easier for smaller businesses which had often struggled to deal with the current probationary period under which staff required monitoring and had to be given areas for improvement before they could be dismissed.

Again such a probationary period is standard throughout the developed world. One will hear a lot of hysterical claims about abusive employers using such a period to trample on employees, but predict that once it is in place, it will largely be a non-event and it will never be got rid of.

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