Continuous employment - Contract of Employment

This refers to the period which count for employment. When an employee has been engaged on separate contracts of employment there is a presumption that they are aggregated to one continuous period unless the employer can show to the contrary. This issue is important for three main reasons:

Redundancy Calculations

Problems arise if an employer has paid an individual a redundancy sum on the termination of the contract of employment and then immediately re-engages the individual on a new contract so that the period of employment is not broken. In that event the period of employment for any new redundancy payments will be continuous from the beginning of the original contract, the fact the employer has already paid some redundancy money is not taken into account. To avoid this problem employers should ensure a clear break occurs in the original contract (at least a months gap) and that the new employment begins with a new employment contract. Note also that if this situation arises the Inland Revenue may hold the employer responsible for Income Tax and NHI payments on any money paid where the 'redundancy' is not valid.

Unfair Dismissal

One years continuous employment is required to qualify for the statutory right not to be unfairly dismissed (but not in the case of discrimination where there is no qualifying period). The significance of this is that an employee who has worked on a series of continuous short term contracts (allbeit in different jobs) will be able to claim they were unfairly dismissed if the employer unfairly dismisses them at the end of their final contract. Their right to claim unfair dismissal will apply even though their final contract was for a defined period and has come to its natural end.

Transfer of Undertakings

The Transfer of Undertakings Regulations mean that where an employee's work is transferred to another organisation the individual has a right to transfer with their job and keep their current terms of employment. In addition their employment is considered to be continuous from the date they were originally employed. New employers should then note such a transfer brings with it the liability to pay redundancy based on the original employment date with the old employer.

The two most common scenarios are someone being dismissed on grounds of redundancy and then reemployed as a part-time 'consultant'. In that case the Inland Revenue will probably want the employer to pay full tax on any redundancy payments. Alternatively a fixed term contractor is reemployed on another contract - this is very likely to give them access to redundancy payments and unfair dismissal protection.