Continuity of employment is a term used to describe the length of time a person has been employed by the same employer. Its importance is demonstrated by being a requirement of s1 of the Employments Rights Act 1996. In the UK, there are a number of benefits that are linked to continuity of employment, including:
- Maternity pay
- Statutory sick pay
- Redundancy pay
- Holiday pay
- The right to request flexible working
- The right to appeal against unfair dismissal
- Impact on mortgage applications
- Impact on finance agreements, loans, and interest rates
For contractors, continuity of employment can be even more important than it is for permanent employees. This is because contractors often do not have the same level of job security as permanent employees. If a contractor loses their contract, or their assignment ends, they may not be able to find another one immediately. This can have a significant impact on their finances.
Mortgages, finance, and contractors
If a contractor has a long history of continuity of employment, this will be seen as a positive factor by mortgage lenders. This is because it shows that the contractor is reliable and has a steady income. This can make it easier for the contractor to get a mortgage and benefit from better interest rates.
When a contractor has a track record of employment gaps or many different employers, mortgage lenders may view it as unfavourable. This is because it indicates that the contractor may struggle to make mortgage payments if they lose their contract. This can make obtaining a mortgage or securing a favourable interest rate more challenging for the contractor.
What can contractors do?
There are a number of things that contractors can do to protect their continuity of employment. One of the most important things is to use an umbrella company. Umbrella companies help to protect the continuity of employment. This is because they are able to bridge any gaps in employment. For example, if a contractor’s contract ends, the umbrella company continues to ‘employ’ them, and when they pick up their next contract, income resumes, without them being ‘unemployed’ for any period of time. This helps to ensure that the contractor’s continuity of employment is not broken, and is seen favourably by credit agencies.
It’s important for contractors to maintain employment continuity, even when switching assignments. Instead of switching employers, contractors can simply inform their umbrella company of the change and continue on with their work. This approach can help prevent any damage that may occur from frequent job changes.
If you are a contractor, it is important to understand the importance of continuity of employment. By taking steps to protect your employment continuity, you can help to ensure that you are financially secure in the event that you lose your contract.
How Continuity of Employment Relates to Umbrella Companies
Umbrella companies are a popular choice for contractors who want to protect their length of employment. This is because umbrella companies act as the contractor’s employer, which means that they are responsible for ensuring that the contractor’s employment rights are protected.
One of the ways that umbrella companies protect the continuity of employment is by ensuring that there are no gaps in the contractor’s employment, by utilising an overarching contract of employment. This means that a contractor can move from assignment to assignment, all under the same employer. In addition, when the contractor’s assignment with one end-client finishes, the umbrella company will help to find them another contract with another client as quickly as possible. This helps to ensure that the contractor’s continuity of employment is not broken.
In addition to protecting the continuity of employment, umbrella companies also offer a number of other benefits to contractors, such as:
- Taking care of all the payroll and tax administration
- Ensuring holiday leave and pay are correctly calculated and paid
- Providing access to statutory payments such as sick pay or maternity pay
- Some may even offer life insurance, private health care or accident cover
If you are a contractor, it is important to choose an umbrella company that is FCSA accredited. This will give you peace of mind knowing that your continuity of employment is protected and that you are receiving the best possible benefits.
The Importance of FCSA Accreditation
The FCSA is a membership body with a code of compliance for umbrella companies operating contracts of employment. Umbrella companies that are FCSA accredited have to meet a number of strict standards, including ensuring that they protect the continuity of employment of their contractors. Our code ensures continuity by ensuring the umbrella does not terminate contractors between assignments but rather keeps them on board.
Our umbrella code states:
- “The worker will be required to enter into employment-related agreements such as an overarching employment contract;” (Section A1-D)
- “A guarantee of at least 336 hours work in any 12-month period (or the pro-rate equivalent if the employment terminates before 12 months) commencing on the employee’s start date of continuous employment and each anniversary thereof.” (Section A7-A)
- “An obligation that the employer will assist the employee to secure future assignments during periods when the employee has no assignment” (Section A7-B)
In addition to this:
- Section A19 ensures the Umbrella has processes in place to support employees in finding suitable work at the end of their assignment.
- Section A20 ensures that the end of the assignment does not automatically lead to the termination of employment.
FCSA’s stance on continuity of employment is important for contractors because it helps to protect their employment rights. If you are a contractor, it is important to check that your umbrella employer or contractor accountant is a member of the FCSA and that they are compliant with the FCSA’s Code of Compliance. This will help to ensure that you are treated fairly and that you do not lose out on your employment rights.