90 day employment trial period – Good for start-ups

The National Party’s proposal of a “90 day trial period” for new employees hired into small businesses (less than 20 employees), is good for start-ups, in-fact in my view it’s an imperative.  I haven’t read the detail yet but the intent appears to be to give employees the right to dismiss new hires, no questions asked, within the first 90 days.  No doubt there will be opportunities to abuse such a provision but, in my view, these will be the exception to the rule.  We need these provision because:

Good people grow business, bad people kill business

Most of the businesses we invest in have between one and three employees when we invest.  If we make a wrong employment decision, which despite years of experience is still easy to do, we are faced with a lengthy and difficult exit procedure – we have lawyers prepared to act for employees on a “fee contingent basis” in New Zealand.  The exit process can shave months off the life of a start-up business and can kill it.  The reality of start-ups is that you have to move quickly and take risks; when you make a bad decision you have to “lance it” and move on quickly.  Bad hires not only cost time and money, they also bring the wider team down.

Money on employment lawyers is dead money

All of the businesses we’re involved in spend money on lawyers trying to: a) get their employment contracts right; and b) seek advice on how to manage “bad hire exits”.  This money is unproductive and is money taken away from investing in growth.  The money is one problem, the greater problem is the time and aggrovation taken with managing your way through the process; time that is better spent on growing your business.

More flexible employment terms will encourage employers to take greater risk

Knowing that we can “back-out” of an employment agreement will allow employees to take greater risks in employment decisions and provide potential employees with the opportunity to demonstrate their value add.  Under a flexible 90-day stand down arrangement, I know that the businesses we are involved in will hire more people…”on success based contracts”.

No doubt the devil will be in the detail, but this is clearly a step in the right direction and an opportunity for small / start-up businesses to have some economic policy that reflects their needs rather than having “one size fit all rules which are largely designed for large corporates and unions” imposed on them.

Previous Post

Next Post