Continuity of employment – why it counts

Employers drafting contracts of employment know that one of the requirements, set out in section 1 of the Employment Rights Act 1996, is for employers to provide details of the employee’s start date and also the date on which continuous employment began. What is continuous employment and why is it so important that it warrants inclusion in the list of terms that an employer is required, by law, to include?

Continuous employment is a term used to describe the length of time that an employee has worked, often but not always for the same employer. In some cases, an employee’s period of continuous employment will also include service with a previous employer. The period of continuous employment is used to determine an employee’s entitlement to benefits, such as maternity or paternity pay and to determine whether or not they are entitled to claim unfair dismissal or the right to a statutory redundancy payment.

It is important to note that continuous employment is a statutory concept, it is not determined by nor can it be modified by contract. This means that it is not possible for an employer and employee to decide that a period of continuous employment has ended or has been broken if statute determines otherwise.

A period of continuous employment is not necessarily the same as the period of time that an employer has worked under an employment contract, continuity of employment may be preserved even where an employee has ended one contract with their employer and not yet started another. Continuous employment also includes any period of employment with an “associated employer”. Two employers are associated where one (directly or indirectly) has control of the other or where both companies are controlled (directly or indirectly) by a third person. In other words, most transfers between group companies will result in the preservation of continuous employment.

Continuous employment cannot be broken by the employee’s absence due to sickness or injury but it can be curtailed by periods of industrial action or when the employee is serving in the armed services or is working outside of Great Britain. In these cases, continuous employment is not broken by its duration is reduced by the time spent abroad or on industrial action. A statutory redundancy payment will also sever continuity but only for the purposes of calculating a future statutory redundancy payment.

Continuity of employment begins on the day on which the employee “starts” work, this means the day on which they begin to be engaged under an employment contract and not necessarily the day on which they actually carry out work for the employer. When calculating the period of continuous employment both the first and last day of employment count meaning that an employee whose employment began on 5 January will have one month’s continuous employment on 4 February, a system of calculation different to the one used to determine notice entitlements and some other employment rights.

Continuity of employment can catch out an unsuspecting employer and it is always worth remembering when employees are transferred between group companies and when calculating benefits. It is useful to remember that an employee’s period of continuous employment may, in some cases, be much longer than the duration of their present employment contract.

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