How will the "Good work plan" affect local government employers covered by the modification order?
Author: Susie Munro
Local government employers will be familiar with the effect of the modification order on how they calculate their employees' continuous service in a redundancy situation. The Government has announced plans to change the way breaks in employment are treated, which could have a greater impact for local government than for employers in the private sector, due to the operation of the modification order.
The "Good work plan"
The Government published its Good work plan on 17 December 2018, setting out its "vision for the future of the UK labour market".
The modification order for local authorities
The effect of the modification order (the Redundancy Payments (Continuity of Employment in Local Government, etc) (Modification) Order 1999 (SI 1999/2277)) is that if an employee leaves one local authority to join another, and subsequently gets made redundant, their service with the first authority will be included when calculating their redundancy payment. The modification order modifies the Employment Rights Act 1996 so that the authorities are treated as "associated employers" under the relevant sections of the Act.
As long as there is no break in employment of more than a week, an employee's service with a succession of local government employers is treated as continuous. This is relevant both for the purpose of determining whether or not they have the two years' service required to be eligible for a statutory redundancy payment and for calculating the amount of that payment.
Under the Green Book (the national agreement on pay and conditions of service), continuous service with another local government employer covered by the modification order also counts for the purposes of entitlement to annual leave, the occupational sickness scheme and the occupational maternity scheme.
As well as local authorities, the modification order covers staff at some other bodies in related sectors, including police staff and some universities, schools and colleges. All the bodies covered are listed in the order.
Re-engagement after redundancy
The effect of a break in service before re-engagement is different if an employee is being made redundant.
An employee under notice of redundancy can have a gap of four weeks or less before starting a new job with the same or an associated employer and their service will be preserved, as long as the offer of new employment is made before the dismissal date. The modification order means that local authorities are treated as being associated employers for these purposes.
No redundancy payment will be payable in these circumstances. The proposal in the "Good work plan" therefore would not affect employees in this situation.
Preservation of service under the Employment Rights Act 1996
Currently, under the Employment Rights Act 1996, for continuity of service with an employer to be preserved for entitlement to statutory employment rights, the break between leaving and taking up a new job with the same employer (or an associated employer) must be less than one week, measured from Sunday to Saturday.
For example, if an employee has a contract that finishes on a Wednesday and then starts another job with the same employer on Friday the following week, their continuity would be preserved, as there has not been a break of a full week between a Sunday and the following Saturday.
The "Good work plan" proposal
As part of its Good work plan, the Government has announced that it plans to extend the time required to break a period of continuous service from one week to four weeks. The aim is to improve access to employment rights for "gig economy" workers, who may work intermittently for the same employer.
The Government has said that it plans to bring forward legislation to extend the allowed break in continuous service, but it is not yet known when details of the legislation will be published, or when the change is likely to come into force.
Implications for local government employers
Because of the operation of the modification order, the effect of the proposal appears to be that an employee could have a gap of up to four weeks between leaving one local authority and joining another, without the clock being reset on their service for the purpose of redundancy pay.
This would mean that more employees are likely to have their continuity of service preserved when they move from one local government employer to another, and more employees would be entitled to higher redundancy payments than is currently the case.
Entitlement to annual leave, sick pay and maternity pay under the Green Book may also be affected, if continuous service is taken to include local government service where there have been breaks of up to four weeks between employers.
Employers would need to have a system in place for checking whether a new employee has been employed by another modification order body within the four weeks before they take up employment. If they have, the employer would also need to check their employment history prior to that job to see whether any breaks between previous periods of employment with employers covered by the modification order were less than four weeks. Administratively, this may be more of a challenge than recognising breaks of under one week.
Few details are known about how the Government will implement its proposal, so it is possible that the impact on local government will be taken into account. Employers should therefore keep up to date with further announcements about this part of the "Good work plan".