A taxpayer funded, Treasury commissioned report which slams the 90 day trial period is being dismissed by the Prime Minister.
Initially introduced in 2009 and extended in 2011, the Government claimed allowing employers to put workers on 90 day trials would be of benefit to both groups.
But a report by Nathan Chappell and Isabelle Sin of Motu Economic and Public Policy Research, who were commissioned by Treasury, found "no evidence that access to trial periods causes firms on average to change the number of people they hire…nor to be more likely to hire those struggling in the labour market."
The main benefit was decreased dismissal costs for employers.
Johh Key says the report contradicts the official advice from Treasury and MBIE.
"Anecdotally, the feedback we continue to get from employers, particularly small ones, is the flexibility in the labour market does help their hiring decisions," Mr Key told reporters at Fielddays.
"It gives them confidence to take on more people. And while the research sort of says it isn't making a big impact that's not really what we get from our official sources."
Mr Key says he's comfortable the law is working as it should.
"We think it's effective and we fundamentally disagree with the research."
The 2014/15 National Survey of Employers found 46 of all employers took on a new employee on a trial period in the last 12 months.
Mr Key says we're a country dominated by small business and it's a big decision when they hire people.
"If you go and talk to employers, if you look at the official advice we get, it stands to reason that if people can take someone on in good faith but nevertheless with the knowledge that if it doesn't work out within a reasonable period of time they have some options. And I think people will take them on."
Unions say the trials have been a failed experiment and the law should be changed.