This week, Esther Smith, partner at Thomas Eggar, and Martin Brewer, partner and employment law specialist at Mills & Reeve, advise on continuous service and how this impacts on service-related benefits.

The question:

An employee is on a temporary/fixed-term contract/permanent contract and will not start in the new role for three weeks. Of particular concern is that pension service is continuous, but how does this impact any service-related benefit? Is there a legal timescale or definition of when employment would be continuous even when there is an actual break between contracts? Also, does it make any difference on what type of contract they would be moving from and to?

Jane Beveridge

Legal advice:

Esther Smith, partner, Thomas Eggar

I am afraid that I was not altogether clear on your question, but I hope I have managed to address it! I have assumed that you have an employee on a temporary contract and they are moving to a permanent role, but there is to be a gap of three weeks between the end of the original contract and the beginning of the new one.

In cases like this, a tribunal would tend to look at the reality of the situation, and if at the end of the fixed-term contract there was an agreement to employ under the new contract, then the employment will usually be deemed to be continuous. This situation often arises in the education sector where people are employed on a term-by-term basis, but the employer commits in advance to their re-engagement the following term – in such situations employment is deemed to be continuous.

Also, there is a ‘statutory bridge’ in the Employment Rights Act which may not be of direct relevance to this situation, but is worth remembering. This provides that where an employee is covered by two contracts with the employer, between which there is a gap of less than one week, the statute will automatically bridge that gap for the purposes of continuous service.

Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information please visit Thomas Eggar

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Martin Brewer, partner and employment law specialist, Mills and Reeve

Jane, I assume from your question that you have an employee moving from one type of contract to another (perhaps fixed term to permanent?) but before the new role starts the old one ends, hence the gap. Assuming that’s correct then, what is the position in relation to continuity of service. Since you refer to ‘pension service’ I wonder whether you are in the public sector? That may make a difference to the position for the reason I will set out below.

The first thing to note is that you need to look separately at statutory continuity and contractual continuity.

Statutorily speaking any week during the whole or part of which the employee’s relations with you are governed by a contract of employment counts in computing the employee’s continuous service. In other words, to break statutory continuity there must be an absence of a contract for a whole week. So an employee could say be dismissed on Tuesday, be re-employed on Friday of the same week on a new contract without a break in continuity.

Having said that, the Employment Rights Act 1996 contains certain provisions which allow up to 26 weeks to count in computing continuous service even if there is no contract of employment in place. This includes circumstances in which the employee is absent from work but there is an ‘arrangement or custom’ in place such that the employee will be regarded as continuing in employment. In other words in your example you can agree that despite the absence of a contract the three week gap will nevertheless count towards continuous service for statutory purposes.

I mentioned the public sector because in some cases (certain NHS contracts for example) continuity is not broken even if there is no contract in place for up to 12 months so if you are in say the NHS you must also read the collectively agreed contract terms (if applicable) to see if contractual continuity is granted anyway.

Contractually even if there is a break in service, a break in continuity, it is still possible for a contract to state that the employer will allow certain benefits to be treated as if continuity had not been broken. If an employer wants to do this then careful drafting is necessary because if you create an arrangement (in this example a contract) you may inadvertently trigger the provision I referred to above and also create statutory continuity. What you need to ensure here is to separate the right to the benefit on a ‘continuous’ basis (i.e. as if there was no break in service) but make it clear that the period of the gap is not one in which the employee is regarded as being in employment for any purpose.

Sorry for the technical reply but it’s a very technical area. In summary the answer to your questions are:

• A break in service does break the right to service related benefits unless you agree otherwise.




• No more than 26 weeks without a contract in place can be counted towards statutory continuity but contractually you can effectively do what you like.




• It makes no difference what ‘type’ of contract the employee has (i.e. fixed term, temporary or permanent) provided it’s an employment contract.

Martin can be contacted at: martin.brewer@mills-reeve.com

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