2 Year Employment Rights

Employees enjoy a number of statutory employment rights and protections, although not all of these apply from the start of their employment. Some of these rights only apply once an individual has completed a certain length of service with the same employer, known as qualifying service.

The following guide for employers, managers and HR personnel examines the employment rights which automatically arise after 2 years’ continuous service — commonly known as 2 year employment rights — comparing these with the various rights that arise from day one.

 

What are 2 year employment rights?

There are certain statutory rights that require a minimum 2 year qualifying period of service. These are commonly referred to as 2 year employment rights. This means that once an employee has worked continuously for the same employer, without any break in continuity, they will automatically become entitled to these statutory rights, including:

• the right to claim unfair dismissal, and
• the right to statutory redundancy pay.

 

The right to claim unfair dismissal

After 2 years’ service with the same employer, employees will automatically gain statutory protection from unfair dismissal. This means that where an employee has 2 years’ continuous service, to be able to lawfully dismiss an employee, the employer would need to provide a fair reason for the dismissal and follow a fair dismissal procedure.

Under the Employment Rights Act 1996, potentially fair reasons for dismissal include capability, conduct, redundancy, statutory illegality or some other substantial reason, for example, where the employee has breached their contract of employment resulting in breakdown in the mutual trust and confidence between the parties.

In addition to following a fair procedure, the employer would also need to show that they acted reasonably when relying on any of the statutory reasons as sufficient for dismissal.

 

The right to statutory redundancy pay

Where any dismissal is due to redundancy — a potentially fair reason for dismissal, provided a fair consultation and selection procedure is followed — an employee is entitled to statutory redundancy pay after two years’ service. The amount of redundancy pay that an employee must be paid is calculated based on the individual’s age, pay and length of service.

An employer may also have their own contractual redundancy scheme in place, offering redundancy pay at an enhanced rate and on enhanced terms, for example, where those with less than 2 years’ service may be entitled to an ex gratia redundancy payment. However, as an absolute minimum, employees with 2 years’ service must receive statutory redundancy pay.

 

How is the period for 2 year employment rights calculated?

The period for 2 year employment rights is based on a 2 year period of continuous employment, where continuous employment refers to the uninterrupted period during which an employee has worked for one employer. This is usually calculated from the first day of employment onwards, where certain breaks in normal employment will still count towards a continuous employment period, such as sick leave, annual leave or maternity leave.

It is also important to bear in mind that when calculating 2 years’ continuous service for the purposes of either unfair dismissal or statutory redundancy pay, this is calculated from the first day of employment to the effective date of termination. This means that where employment is terminated by the employer with pay in lieu of notice, the effective date of termination is the date upon which the relevant statutory notice period of one week would end. For example, if an employee started working for their employer on 1 September 2020, they would actually gain the necessary qualifying 2-year period on 24 August 2022.

Continuous employment can also apply where an employee undertook work for a previous employer, but the business has been subsequently sold. Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended) — the TUPE regulations — any employees transferring from one employer to another will continue to enjoy the same terms and conditions of employment, and their existing employment rights will remain intact. These employees will also carry over the same continuity of employment for the purposes of any 2 year employment rights for which continuous service is a qualifying requirement.

 

What are ‘day one’ employment rights?

Day one employment rights are those statutory rights within an employment law context that do not require any qualifying period of service, where day one rights are absolutely fundamental to fair treatment in the workplace. Day one employment rights include:

• the right not be automatically unfairly dismissed, and
• the right not to be unlawfully discriminated against.

 

The right not to be automatically unfairly dismissed

In claims for ordinary unfair dismissal, an employee will require 2 years’ service. However, there are notable exceptions to the 2 year rule, where the law affords special protection to employees who are dismissed for certain statutory reasons that are classed as automatically unfair. When bringing an automatic unfair dismissal claim, an employee will only need to prove that the reason for dismissal was for one of the grounds prohibited by law, but not that the employer had acted unreasonably or had failed to follow a fair procedure.

Under the 1996 Act, there are around 60 different grounds upon which an employee can claim automatic unfair dismissal, including where the reason for dismissal is connected to:

• pregnancy and childbirth, or any other reasons relating to maternity
• taking leave for family reasons, such as shared parental leave or time off for dependants
• for asserting any statutory rights such as the right to annual leave, the right to the National Minimum Wage or any rights under the Working Time Regulations
• for making a protected disclosure about wrongdoing in the workplace, ie; whistleblowing
• for highlighting or reporting health and safety concerns in the workplace.

In limited cases only, automatic unfair dismissal will still require 2 years’ service, for example, dismissals in connection with the sale of a business, where the sole or principal reason for the dismissal is deemed to be the transfer. This is because the purpose of the TUPE Regulations is to preserve and protect an employees’ rights, rather than to enhance them.

 

The right not to be unlawfully discriminated against

Under the Equality Act 2010, all workers are afforded protection against discrimination, harassment and victimisation in relation to a number of protected characteristics, regardless of their length of service. This means that a worker will be protected from any form of unlawful discrimination from day one of employment. The protected characteristics as set out under the 2010 Act include age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.

If an employee is dismissed for a reason related to a protected characteristic, this could amount to both unlawful discrimination and automatic unfair dismissal. Equally, if an employee is treated less favourably in the workplace by reason of a protected characteristic, this could amount to unlawful discrimination, for example, where someone is denied a promotion or training opportunities because they are transgender or deemed too old.

 

What other employment rights arise and when?

In addition to the right not to be discriminated against, other rights around equality arise from the first day of employment. These include the right to receive equal pay to employees of the opposite sex doing the same or broadly similar work; the right for fixed-term employees to be treated no less favourably than comparable permanent employees; or the right for part-time workers not to be treated less favourably than comparable full-time workers. All disabled workers are also entitled to reasonable adjustments to ensure that they are not substantially disadvantaged when doing their jobs when compared with non-disabled workers.

Other day one employment rights for employees include the right to statutory maternity and adoption leave, and the right to statutory sick pay, provided the employee has done some work under their employment contract and has been off sick for at least 4 days. From day one, all workers will also have various pay rights, such as the right to receive at least the National Minimum Wage and itemised payslips, as well as the right not to have unauthorised deductions made from their pay and to accrue the statutory minimum level of paid holiday.

Employees may subsequently become entitled to additional employment rights at varying milestones of service, up to the point at which they acquire their full 2 year employment rights. For example, an employee will become entitled to a statutory minimum notice period of one week after just one months’ service; the right to request flexible working or the right to statutory maternity pay after 26 weeks’ service; and the right to take 18 weeks’ unpaid parental leave for each of their children under 18 after one full years’ service.

An individual may also be entitled to enhanced contractual rights once they have reached a certain length of service, depending on the terms of their employment contract. These rights could include longer notice, more redundancy pay, additional annual leave, or any other enhanced contractual rights that trigger under the contract after a qualifying period of time.

 

Managing employment law risks  

Even though employees do not acquire full employment rights until they have worked continuously for the same employer for a period of 2 years, employers should not overlook the many fundamental rights that arise from day one of employment, especially when it comes to any decision to dismiss. This is because, by seeking to ‘fast-track’ a dismissal, employers can easily fall foul of the provisions relating to both automatic unfair dismissal and unlawful discrimination. In many cases, employers may also be guilty of wrongful dismissal, where the incorrect notice pay is given or they have failed to follow any contractual dismissal procedure.

Employers are therefore advised, where at all possible, to follow fair dismissal procedures, even where an employee does not yet have 2 years’ service. In most cases, they should also explore all alternative options to dismissal, as this can help to minimise the possibility of falling foul of the law. For example, where an employer is looking to dismiss an employee by reason of misconduct or poor performance, it is vital that the employer first undertakes a full disciplinary or capability procedure, providing written warnings and putting support measures in place to help the employee get back on track before any final decision is made.

In cases where a worker is suffering from a long-term physical or mental health impairment that amounts to a disability within the meaning of the Equality Act 2010, that person will not only be afforded protection from unlawful discrimination, but will have the right to reasonable adjustments in the workplace. It is easy to anticipate, for example, how an individual suffering from depression or anxiety, or work-related stress, may start to underperform. By providing staff with the chance to explain their position and advance any mitigation, this is likely to be far less costly and time-consuming than defending a claim before the employment tribunal.

Decisions around dismissal are also only the tip of the iceberg when it comes to employment rights, where an employer can be exposed to all kinds of claims throughout the lifecycle of employment. Securing expert advice from an employment law specialist can help employers to avoid these legal pitfalls, both before and after the accrual of 2 year employment rights.

 

Need assistance? 

Our HR and employment law specialists advise and guide employers on all aspects of employment rights, including how employee rights are enhanced after two years’ continuous service. To minimise legal risks while protecting your business’ commercial interests, speak to our expertstoday.

 

2 year employment rights FAQs

What is the 2 year employment rule?

The 2 year employment rule refers to the requirement for an employee to have 2 years’ continuous service with their employer before acquiring full employment rights, including the right not to be unfairly dismissed and to claim statutory redundancy pay.

Can you fire someone after 2 years?

It is possible to dismiss an employee after 2 years, but only if the employer has a fair reason for the dismissal, such as misconduct or poor performance, and they have followed a fair disciplinary or capability procedure.

Can you dismiss an employee within 2 years?

An employee can be dismissed within 2 years without the need to provide a fair reason for dismissal, where any right to claim unfair dismissal usually only arises once an employee has accrued 2 years’ continuous service.

How long before an employee has rights?

An employee has some rights from day one of employment, such as the right not to be unlawfully discriminated against, although full employment rights, including the right not be unfairly dismissed, are only acquired after 2 years’ service.

Last updated: 19 May 2022