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URN No: 07/556
RULES GOVERNING CONTINUOUS EMPLOYMENT
Foreword
This outlines the rules for calculating a period of continuous employment. It gives general guidance only and should not be regarded as a complete or authoritative statement of the law.
Readers should be alert to the possibility of developments in case law which may affect the rights of employees.
Further information can be obtained from the Advisory, Conciliation and Arbitration Service (Acas), or the Department of Trade and Industry’s Redundancy Payments Offices.
Introduction
1: Under employment protection legislation employees have a number of individual rights. Many of these rights apply only to employees who have a minimum period of continuous employment. The rights, with their minimum periods, are set out in a table, “Employment rights to which the rules on continuity of employment and a week’s pay apply” - see Related DTI links.
2: Continuous employment usually means working for the same employer without a break, but it does not always mean this. Paragraphs 12 to 14 of this document explain that sometimes, employment can be regarded as continuous in spite of short breaks. Paragraph 18 of this document explains that time with a previous employer can sometimes be added on to time with the present employer. But to build up the minimum periods of continuous employment and to qualify for the rights, employees must meet the conditions which are explained from paragraph 9 of this document onwards.
3: Qualification dates are explained in paragraph 6 of this document and are listed in the table. All of the rights have other conditions besides the length of continuous employment - to find out about these you should read the document about the particular right you are interested in. Titles of the documents are listed in the final column of the table.
4: This document also explains what the legislation means by a week’s pay. Entitlements to redundancy pay, guarantee pay, some types of compensation awarded by employment tribunals, pay during notice and during time off for job-hunting or antenatal care are all related to an employee’s ‘week’s pay’, defined as the amount of pay the employee is due per week under his or her contract of employment. This is not necessarily the same as average pay, or pay in a typical week. Paragraphs 19 to 27 explain how to work out a week’s pay under this definition.
5: This document refers often to the contract of employment, or to hours worked or pay due under the contract. Contracts of employment may be oral or written. They may be of indefinite duration, or for fixed terms. They may be for training, apprenticeship or other purposes. In law, employees have a contract of employment as soon as they start work even where the written statement of employment particulars required by the legislation has not been given to the employee.
RULES GOVERNING CONTINUOUS EMPLOYMENT
Length of continuous employment
6: To work out how long an employee has been continuously employed, the first step is to establish his or her qualification date for the purpose of the right in question. The qualification date is defined differently for different rights; the table gives a summary. But to make sure of getting the correct qualification date, you should refer to Unfairly dismissed? - Guidance about the right you are interested in.
7: Length of service is worked out in months and years, starting from the day the employee began to work for the present employer (1) and ending with the qualification date. But where the period of continuous employment includes days which do not count towards the total length of service but which do not break continuity (for example days on strike - see paragraphs 13 and 14), the starting date is treated as postponed by that number of days.
8: Any dispute about whether the length of an employee’s continuous service qualifies him or her for a particular right can be settled by an employment tribunal.
9: To find out whether all the service from the start of the employee’s employment to the qualification date has been continuous and whether it all counts, it must be considered week by week. For this purpose weeks end with a Saturday. If at any point continuity has been broken, none of the weeks before the break count towards the employee’s continuous service. In any employment tribunal proceedings where continuity is an issue, the tribunal will assume the employment was continuous until it is shown that it was not continuous.
General rules about working hours
10: A week counts towards a period of continuous employment if in that week the employee actually works, or the employee’s relations with the employer are governed by a contract of employment.
Absence from work because of sickness, maternity leave, parental leave, temporary lay-off and holiday breaks all count automatically, provided the contract continues throughout.
Weeks when there is no contract
11: Weeks may also count even though there is no contract of employment if:
Reinstatement or re-engagement after unfair dismissal
12: If an employee complains of unfair dismissal and is subsequently reinstated or re-engaged in the circumstances listed below by the employer, the employer’s successor or an associated employer, then all the weeks which fall between the date when the employee’s dismissal took effect and the date when he or she resumes (or starts) work for the employer count towards the employee’s period of continuous employment as though there had been no dismissal.
The relevant circumstances are that the reinstatement or re-engagement arises from:
from 1 October 2006, the statutory duty to consider a request to work beyond retirement or arising out of use of this procedure.
Industrial disputes (strikes and lock-outs)
13: An employee’s starting date is treated as postponed by the number of days between the last working day before the employee was on strike and the day on which he or she resumed work. The starting date is not postponed by periods in which the employee is locked out.
14: Therefore although a period in which an employee was on strike may not count, it does not break the continuity of the period of employment (except in some circumstances where an employer dismisses the employee during the strike).
15: When an employee has completed the minimum period of continuous employment needed to qualify for any of the rights in the table, he or she keeps those rights.
16: Some of the rights in the table increase with further service (the right to notice, redundancy pay and the basic award of compensation for unfair dismissal). However, the amount of compensation is normally based on the contractual earnings at the time the contract ends.
17: Service abroad generally counts towards the period of continuous employment, but a week of such service only counts in determining rights to redundancy pay if the employee was classed as an employed earner for social security purposes during that week.
Time with a previous employer which may count
18: Changes of employer normally break continuity, and mean that employees must start all over again to qualify for rights. But the following types of change do not break continuity, so that continuous service before the change also counts if:
EMPLOYMENT RIGHTS COVERED BY THIS DOCUMENT
See Related DTI Links – “Employment rights to which the rules on continuous employment and a week’s pay apply”.
Rules for calculating a week's pay
Calculation date
19: As explained in the introduction, the legislation sets out how a ‘a week’s pay’ should be calculated for the purposes of many individual rights. The table lists them. It also shows the date at which the week’s pay should be calculated for the purposes of each right - known as the calculation date. Please note that this calculation date is only relevant to working out a week’s pay: it may well be different from the qualification date you need to work out length of continuous service, which is given in the same table.
20: For some of the rights shown in the table, the payments and awards are subject to financial limits set by Regulations. These limits are regularly reviewed by the Secretary of State; see Limits on payments - Guidance for the current limit on payments. The document on the right in question will also tell you more about this.
Employees paid a fixed wage or salary or entirely on an hourly rate
21: If an employee’s pay for work done in normal working hours does not vary, a week’s pay will be the pay due for the basic hours the employee is contracted to work. Any regular bonus or allowance (except an expense allowance) which does not vary with the amount of work done may be included. But pay for overtime hours may only be included if the contract of employment obliges the employer to provide those hours of overtime work as well as obliging the employee to work overtime if the employer provides it.
Employees paid by piece-rates, variable bonuses or commission
22: If an employee’s pay varies with the amount of work done, as, for example, under piece-work systems, or when pay is partly made up of variable bonuses or commission related to output performance, then a week’s pay for normal working hours (excluding overtime hours not binding on both sides, as above) is based on a specially calculated hourly rate. This rate is the average hourly rate over a 12-week period, ending on the calculation date if the calculation date is the last day of the pay week. If the calculation date falls during a pay week, the 12-week period ends on the last day of the previous week.
23: To get this special average hourly rate, only hours when the employee was working (including overtime hours) can be taken into account. If the employee has less than 12 weeks’ service, other factors might be relevant such as the working hours of other employees of the same employer and/or the expected pattern of working based on the terms on which the job was offered. Any pay for hours not worked, for example under a guaranteed week agreement, must be left out. If overtime hours are included, the pay must be adjusted, as explained in paragraph 25 below. Any week in which no work was done should be replaced by the last previous week when the employee did work, to bring the total number of weeks up to 12. 12/13 of any quarterly bonus, or 12/52 of any annual bonus, can be included, provided the bonuses are not paid specifically for some time outside the 12-week period. The hourly rate is calculated by dividing the pay to be taken into account over the 12-week period by the number of hours worked during the same period.
24: If at the calculation date an employee is contracted to work normal hours, but on days of the week or at times of the day which differ from week to week or over a longer time so that the pay for any week varies (for example when the normal hours worked at night or at the weekend attract a higher rate of pay), then a week’s pay means pay for the average number of normal weekly working hours at the average hourly rate. To allow for variation of hours according to the shift worked, the average number of normal weekly working hours is calculated by dividing by 12 the total number of normal working hours during a period of 12 weeks, ending on the calculation date if the calculation date is the last day of the pay week. If the calculation date falls during a pay week, the 12-week period ends on the last day of the previous pay week. The average hourly rate is worked out in the same way as for piece-workers, explained in paragraph 23.
Adjusting pay for work done outside normal hours
25: Work done outside normal working hours, for example voluntary overtime, will sometimes be included in arriving at the average hourly rate. Where pay for such work is higher than pay for the same work done in normal working hours, the pay must be adjusted, that is to say brought down to the level it would have been if the same work had been done in normal working hours. If there is more than one rate for work done in normal working hours, for example because the hourly or piece-rate goes up after a certain number of hours have been worked or units produced, the overtime pay should be brought down to the lower of the ‘normal hours’ rates.
Employees with no normal working hours
26: For an employee with no normal working hours - for example an outdoor sales representative paid wholly by commission - the amount of a week’s pay is the average weekly pay over a 12-week period, ending on the calculation date if the calculation date is the last day of the pay week. If the calculation date falls during a pay week, the 12-week period ends on the last day of the previous pay week. Any week for which no pay was due should be replaced by the last previous week for which pay was due, so as to bring the number of weeks to be averaged up to 12.
Work done for a previous employer
27: Weeks worked for a previous employer can be included in the 12-week period over which the hourly rate is calculated, if the change of employer did not break the employee’s continuity of employment (that is, if it fitted one of the descriptions in paragraph 20).
Footnotes
1 Or any previous employer from whom service may be carried forward
2. Regulations on the transfer of undertakings may also be relevant - see A guide to the 2006 TUPE Regulations for employees, employers and representatives.
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