I have two senior members of my organisation that want to retire. We would like them to undertake roles as consultants for a few months following their retirements to provide expert consultant help on a part time basis (a day or so a week). They are happy with this solution as they feel it will support their transition into retirement.
Neither want to be contractors and deal with their own tax returns/ invoicing us etc. but instead are asking for part time, fixed term contracts. Whilst I would like to support this, I also want to protect the business and ensure that no previous service will count should we find ourselves in a redundancy situation. I have constructed a contract that states that no previous employment with the organisation will count as continuous service. There will be no actual break, other than a week off.
Peter replies:
One of the legal dangers is that any agreement now to have a gap, and then restart employment has risks. Clearly you are all happy now and no one is thinking this could go wrong – but it could do so.
Even if the gap were longer than 1 week, the break may not be effective, because there is a clear intention that they rejoin you. This is likely to lead a Tribunal to conclude that the overall intention was to ensure continuity. In theory if the employer does wish to re-employ the redundant employee, but also wants to ensure that his or her continuity of employment is broken by the intervening redundancy, there should be a clear calendar-week break (starting on a Sunday) between the termination of one period of employment, and the commencement of the new period. But this will only work, provided that there has been no agreement between the parties to preserve continuity. The existence of a contract suggesting no continuity will not unduly sway a Tribunal. They are obliged to follow the rule that, it is not possible to enter a contract which deprives an employee of their statutory rights. There is also a statutory presumption in favour of continuity, so you would have an uphill battle.
It is the Employer that wants them to stay, rather than the employees pushing for it, so if it did ever get to a redundancy stage, then it feels fair that they should benefit from any redundancy pay due. Remember that redundancy pay would be based on their new part time earnings, so at one day a week it might not actually be that much money from your point of view. It is worth doing the sums to see what the reality is. I would guess that these employees are trusted and respected as you want to retain them, so a bit of redundancy money (which might never occur) is a small price to pay and also avoids any messiness/deceit/ambiguity about whether they have really had a break in service.
Give them the part-time fixed term contracts they have asked for, so that they are happy, and there is a logic for either party to withdraw honourably, should it not quite work out as hoped for.
If you want a more water tight situation, where you do not risk later potential claims of continuity of employment, make sure there is a clear break of about a month in their employment before considering inviting them back on a part time basis. Also, make sure there is no paperwork, or email trail, that records what has been agreed in advance, and draw up the new part time contracts after the break in employment.
The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.
