Prime Minister John Key believes the 90-day trial period for new employees does work despite a Treasury-commissioned report indicating the policy has 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.

Despite that, the Prime Minister told Mike Hosking he has no doubt the legislation is encouraging employers to take on extra staff.

"You can't tell me the fact that they know the impact that one staff member that might not work out would have on their business, and you can't tell me that they fact that they might be able to sever that relationship within 90 days isn't a factor in allowing them to hire them."

WATCH: Full interview between PM John Key and Mike Hosking

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."