John Key dismisses research that finds 90-day trial doesn't boost employment

EPMU protestors at a 2006 rally protesting against a 90-day trial period for workers. Research shows the new rules have had little effect - either positive or negative. Photo / Ross Setford

Prime Minister John Key has dismissed research that found allowing workers to be sacked within their first 90 days on the job had failed to boost employment.

Treasury-funded research conducted by Motu found no statistically significant increasing in hiring by employers following the introduction of the 90-day trial periods in 2009.

Mr Key said advice from Treasury and Mbie officials was that the policy had been worthwhile - and he received constant feedback saying as much.

Read an executive summary of the research here.

"You can have a piece of academic research but it's quite different from the small cafe owner whose money is on the line, who is taking the risks and who actually rely on this kind of policy.

"We are very comfortable that the law is working, we think it is effective, and we just fundamentally disagree with the research."

Motu Fellow Isabelle Sin said the research used "data from every firm and every person in New Zealand"to assess the law changes' effect.

"The main effect of the policy was a decrease in dismissal costs for firms, while many employees faced increased uncertainty about their job security for three months after being hired," Sin said.

Some industries saw an increase in hiring following the policy change, but Sin said these effects were insignificant.

"This evidence is statistically weak, meaning the findings may be driven by pure chance and may not reflect any real-world effect."

The policy was controversial on its passing, with unions and the Labour Party arguing it would make employment for vulnerable people precarious.

The Government and business lobbyists said the law change would allow employers more willing to take risks in hiring and would increase jobs.

The policy was implemented in selected industries in 2009, then deemed a success and rolled out nationwide in 2011.

"My research shows that the 90-day trial period isn't helping people get jobs. However it doesn't make people less likely to leave secure jobs and doesn't make employment relationships less stable. Overall, my research suggests the 90-day trial isn't doing much at all," she said.

A Cabinet paper on the research stated that Treasury and Mbie advice was that, on balance, the 90-day policy appeared to make a positive, if small, difference.

An employer survey in 2013/14 indicated that 63 per cent of firms that had employed a new staff member in the past year had used a trial period.

Workplace Relations and Safety Minister Michael Woodhouse told the Herald that the Motu research missed the point.

The 90-day period was designed to protect jobs during the global financial crisis, he said.

"Yes, it is technically correct to say that jobs didn't grow thanks to the 90-day trial period, but they hadn't looked at whether or not jobs were protected.

"I think the 90-day period did give employers ... the opportunity to give a guy a go, when they might not otherwise have."

However, Council of Trade Unions secretary Sam Huggard said the 90-day periods did not give people a "foot in the door".

"The research shows there is no evidence for the Government's promise that this law would give vulnerable workers a better chance of a job. It just makes them more vulnerable.

"Removing 90 day fire at will periods from law would show that the Government is committed to a fair law, a modern law, a better law."

Labour's workplace relations spokesman Iain Lees-Galloway said the new research showed the trials had failed, and previous studies cited by National had overstated benefits.

"While there have always been probationary periods, National introduced a fire-at-will measure.

"Labour will change the law to restore fairness. Employers will be required to give decent feedback."

Labour had strongly opposed the trial periods introduced by National because they allow employers to sack a worker within the first 90 days without risking a case of wrongful dismissal.

Last July, leader Andrew Little said Labour was looking at making changes rather than scrapping the 90-day trials altogether.

He has indicated Labour will come up with its own version of trial period for new workers by merging aspects of the 90-day trial and a separate probationary period. This would make the process fairer for employees, he said.

Read the full Motu research here:

- additional reporting Nicholas Jones