Re-employing an employee after redundancy is confirmed.

How do the statutory rules on suitable alternative employment affect continuity of employment?

In the context of re-employment after redundancy, section 138(1)(a) of ERA 1996 states that, "where an employee's contract of employment is renewed, or he is re-engaged under a new contract of employment in pursuance of an offer (whether in writing or not) made before the end of his employment under the previous contract … the employee shall not be regarded as dismissed" for the purposes of a statutory redundancy payment. The renewal or re-engagement must take effect within four weeks of the termination of the old contract (section 138(1)(b), ERA 1996). Continuity will not be broken and the period of time between the employee being dismissed and re-engaged will contribute towards continuous employment (section 213(2), ERA 1996).

The above brings the question; whether the offer of re-engagement must be for a 'suitable alternative job' for continuity of employment to be preserved with the employer, or whether it also applies to an offer for any job with the employer, including a role with less pay for more hours of work and different duties that is, not a suitable alternative role?

For example, if an employer wants to make employee redundant and offers an employee another role that is not likely to be seen as suitable alternative employment to commence two weeks after the redundant role ends. This is to break continuity of employment. The employee gets payment in lieu of notice and a redundancy payment and accepts the new role. The employee then commences the new role two weeks later. Would continuity of employment be preserved in this situation despite new role being an effective demotion and there being a two-week break in service? Would payment of the statutory redundancy payment prevent the employee from being entitled to a further redundancy payment if he is subsequently made redundant from the new role?

Section 138(1) of the Employment Rights Act 1996 provides that an employee shall not be regarded as dismissed for the purposes of a statutory redundancy payment where:

An employee is re-engaged under a new contract of employment in circumstances where an offer has been made before the termination of the previous contract.

The re-engagement takes effect within four weeks after the previous contract comes to an end.

This is because a four-week statutory trial period applies where an offer of alternative employment is made that is on different terms to the previous contract.

What this means is that continuity of employment is preserved from the one period of employment to the next for the purposes of eligibility for a statutory redundancy payment so that if the new contract is terminated during the trial period, the employee will be entitled to a statutory redundancy payment based on their continuous service. The benefit of the statutory scheme from the employer's perspective is that if the employment isn't subsequently terminated, then the employer will have avoided having to make a statutory redundancy payment in respect of the termination of the original contract, by reason of redundancy.