90-Day Trial Periods Are Back for All Employers: What It Means for Group Insurance

The Employment Relations (Trial Periods) Amendment Act 2024 received Royal Assent on 21 May 2024 and came into force on 22 May 2024. The primary change is the removal of the previous restriction that limited 90-day trial periods to employers with fewer than 20 employees. Large employers, who had been excluded from using trial periods since the previous Labour government's changes in 2019, can now use them again.

The core rules for a valid trial period remain the same. The trial must be agreed to in writing as part of the employment agreement, and this must happen before the employee starts work. It can only apply to employees who are genuinely new to the employer and have not previously worked for them. The trial period cannot exceed 90 calendar days.

During a valid trial period, the employee cannot bring a personal grievance for unjustified dismissal if they are let go. The employer must still give the employee the notice period specified in their employment agreement. Importantly, employees on trial periods retain all other employment rights: minimum wage, annual leave, sick leave, public holidays, health and safety protections, and the right to raise a personal grievance for other reasons such as discrimination or harassment. Being on a trial period does not mean being employed without rights; it means one specific right (the right not to be unjustifiably dismissed) is temporarily modified. It is also worth ensuring workers are correctly classified as employees rather than contractors — trial periods only apply to employees.

The guidance on trial periods is at employment.govt.nz/starting-employment/trial-and-probation-periods/trial-periods.

The most important question HR teams should ask about trial periods and group insurance is: does our scheme cover employees from day one, and does it treat trial employees the same as permanent employees? The answer varies depending on the specific policy terms.

Most group insurance schemes have an enrolment window for new employees. This is typically a period of 30 to 90 days from the employee's start date during which the employee can join the scheme under automatic acceptance provisions, meaning without underwriting or individual health assessment. If the employee applies within this window, they are added to the scheme with full coverage from the date they join.

The trial period does not pause or extend this window. An employee who starts work on a trial period and has a 60-day enrolment window needs to be enrolled within those 60 days, regardless of when (or whether) the trial period resolves. HR teams should treat the enrolment process for trial employees exactly as they would for any new employee.

If an employee is enrolled in the group scheme and is subsequently dismissed during the trial period, their insurance cover typically ends when their employment ends. The group scheme covers current employees, and when the employment relationship ends, so does membership of the scheme. Some schemes offer conversion provisions that allow departing employees to move their group cover to individual policies without underwriting, which can be a meaningful option for employees who may have developed health conditions during their employment.

Dismissal during a trial period is less administratively complex than a standard dismissal, but it is not free of obligations. The employer must give the contractual notice period, and the employment must end within the 90 calendar days. The employee's entitlements up to the dismissal date must be settled: any accrued annual leave, final wages, and other entitlements.

For group insurance, the end of employment during a trial period is treated the same as any other termination. Cover ends with employment. If the scheme has a conversion option, it should be communicated to the departing employee at the time of dismissal, as the window for exercising this option is typically short (often 30 days from the date cover ends).

From a claims perspective, if an employee makes a claim during the trial period for an event that occurred while they were covered, that claim should be processed normally. The subsequent dismissal does not retrospectively remove cover for events that occurred during the period of employment.

The practical recommendation is to include benefits information, including group insurance, in every new employee onboarding process regardless of whether the employee is on a trial period. Trial employees have the same entitlement to understand what benefits they have access to as any other new starter.

Communicate clearly what happens to benefits if the trial period ends in dismissal. Being upfront about this at the start, rather than leaving it as a surprise, is both good employment practice and consistent with the good faith obligations that apply throughout an employment relationship, including during a trial period.

If your group scheme has a waiting period before cover begins (some schemes have a 90-day or 6-month wait before certain benefits apply), this interacts with trial periods in a way worth thinking through. An employee dismissed at day 89 of a 90-day trial may never have had their waiting period satisfied and may have no access to benefits at all during their time with you. Reviewing your scheme terms against your trial period policy will show you whether this is a gap worth addressing.

The ability to dismiss without a personal grievance for unjustified dismissal is a significant protection for employers making hiring decisions under uncertainty. It is most valuable when the concern about a new hire is genuine and relates to their fit for the role. Using it as cover for dismissal on discriminatory grounds still exposes the employer to a personal grievance claim, because discrimination grievances remain available during a trial period.

From a benefits perspective, the extension of trial periods to all employers is broadly neutral. The change does not alter the fundamentals of how group insurance works. What it does create is a broader population of employees in the first 90 days of employment across New Zealand, all of whom need to be enrolled in benefits schemes promptly, given clear information about their coverage, and treated consistently with the employer's own policies.