Officials suggest the Coalition Government should keep the current 90-day trial settings.
But they have recognised the different options considered are "finely balanced" and a lack of research means there is a limited understanding of the impacts.
The Government will this week move to expand the 90-day trial scheme to all businesses, beyond the current settings which only allow businesses with fewer than 20 employees to use the trial period.
The scheme allows employers who are wary of hiring new employees to employ them for a 90-day trial and dismiss them for any reason.
Importantly, the employee must agree to being subject to the trial period. The previous Labour Government in 2018 pulled back the policy to only apply to businesses with 19 or fewer employees.
Restoring the scheme for all businesses regardless of size is a key part of the new Government's 100-day plan and is something Workplace Relations and Safety Minister Brooke van Velden said would provide confidence to businesses to hire new people.
But a Regulatory Impact Statement (RIS) created for the extension of the scheme reveals officials at the Ministry of Business, Innovation and Employment (MBIE) prefer keeping the status quo.
They considered three options: the status quo, the Government's preferred option to extend the trial period to all employers, and extending it to employers with fewer than 100 employees.
"We consider that the main impacts of the 90-day trial policy are perceived insecurity for employees who are on a trial period and reduced costs for employers that choose to dismiss an employee on a trial period," officials said.
"We consider that smaller employers are more likely to benefit from trial periods because they are less able to absorb the costs of a poor match or dismissal. In comparison, larger employers can be more equipped to manage any dismissal processes and absorb the costs."
They said there were "diminishing benefits" from increasing the availability from 89 percent of employers under the status quo to all employers and "this would not outweigh the costs of insecurity to a greater number of employees".
"We consider that the option to extend trial periods to employers with fewer than 100 employees may lead to greater uncertainty than the other options. Some employers may find it difficult to assess whether they are eligible to use trial periods, particularly if their employee numbers fluctuate around the employee threshold."
Despite preferring the status quo, the ministry said it considered the three options "finely balanced".
There was limited research about the trial periods in New Zealand, the ministry said, but research commissioned by Treasury in 2016 found the scheme at that time didn't have any significant effect on the quantity of hiring, the probability that a new hire is a disadvantaged job seeker, the survival rate of new employment relationships or employees' willingness to change jobs.
Given the research, MBIE said none of the options "are likely to meet the objective of encouraging employers to take on more employees, particularly disadvantaged job seekers".
"We expect that smaller employers would gain the greatest benefit from trial periods. All employers face risks and costs associated with recruitment, performance management, and dismissal processes, and trial periods can reduce these risks and costs.
"However, smaller employers generally face greater relative risks and costs than larger employers (compared to the resources they have), and are often less able to manage the processes and costs (eg through dedicated human resource advice).
"The current restriction of the status quo therefore targets the availability of trial periods to employers where the positive impact could be the largest."
But extending the availability would likely increase the number of new employees likely to experience insecurity.
"The limited data on the inclusion of 90-day trials in employment agreements and whether they are then used to dismiss employees in the first 90 days, makes the comparison of the options difficult. Though it is finely balanced, MBIE considers that the increased benefits to employers under options two and three do not outweigh the costs of insecurity to a greater number of employees under those options, compared with the status quo."
The analysis was also limited by the Government wanting to move quickly with expanding the scheme.
While there was limited time to engage with stakeholders, previous analysis found unions wanted the trial period removed so employees can have more security, while employers wanted to keep the status quo (at the time the scheme applied to all businesses) to minimise issues when dismissing an employee.
"Recent media suggests that these stakeholder views have not changed significantly since this time."
In a statement last week, van Velden said the Government would extend the trials to all businesses by Christmas.
"Whether a business has two or 200 employees, bringing on any new employee costs time, it costs money and it is in the best interests of any business to find the right fit."
She said these would provide greater opportunities to businesses to "employ someone who might not tick all the boxes in terms of skills and experience but who has the right attitude, without the risk of a costly dismissal process".
"The extension of 90-day trials will not affect other aspects of employment relations, such as the requirement to act in good faith, or worker protections regarding pay, conditions, leave, and health and safety.
"It is also important to note that extending the availability of 90-day trials does not mean that all new employees will have trial conditions, rather it provides the option to include this provision in employment agreements."
