The Late Payment of Commercial Debts (Interest) Act 1998 (Commencement No. 1) Order 1998

Article 2(2)

SCHEDULE 2 CALCULATION OF THE NUMBER OF EMPLOYEES FOR THE PURPOSE OF DETERMINING WHETHER A BUSINESS IS A SMALL BUSINESS OR A LARGE BUSINESS

1.—(1) For the purposes of this Order, the number of full-time employees employed in a business of a party to a contract for the supply of goods or services on any day is subject to sub-paragraph (2) below, the average number of full-time employees over the relevant period in relation to that day, calculated in accordance with the following provisions of this Schedule.

(2) Where the contract is made on the first day on which the business is carried on, the number of full-time emplyees employed in the business shall be the number of full-time employees at the time at which the contract is made, calculated in accordance with those provisions.

Meaning of “employee” and “employer”

2.  For the purposes of this Schedule, “employee” means–

(a) an individual who is employed in the business–

(i) under a contract of service or apprenticeship;

(ii) under any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;

(b) a partner; and

(c) in relation to a business carried on by one individual, that individual,

and “employer” means the person for whom such employee so works (for the avoidance of doubt it is hereby declared that in the case of sub-paragraph (b) above, the employer is the partnership, and in the case of sub-paragraph (c) above, the employer and the employee are the same person).

Full-time and part-time employees

3.—(1) For the purposes of counting the number of full-time employees–

(a) an employee shall be regarded as full-time if that employee works for 35 hours or more per week; and

(b) an employee shall be regarded as part-time if that employee works for less than 35 hours per week.

(2) A part-time employee shall be counted as a fraction of a full-time employee, the fraction being calculated as

where the number of full-time hours is–

a

the number of hours which a full-time employee of the same description as the part-time employee works in the business concerned; or

b

where there are no full-time employees of that description, 35 hours per week.

(3) In this paragraph, a reference to the number of hours which an employee works is a reference to the number of hours which that employee is contractually required to work, or ordinarily works, if greater or where the contract does not provide for the number of hours, in each case excluding any meal break or rest period exceeding 15 minutes.

The relevant period

4.  The relevant period for the purposes of this Schedule is either–

(a) the complete period of 1st April to 31st March immediately preceding the date of making the contract; or

(b) where the business was not being carried on throughout that period–

(i) the period of complete months throughout which the business has been carried on ending on that date of 31st March; or

(ii) where the business has not been carried on for at least one complete month ending on that date of 31st March, the number of complete months for which the business has been carried on, ending at the end of the month immediately preceding the month in which the contract is made; or

(iii) where the business has not been carried on for at least one complete month, the number of days for which the business has been carried on prior to the day on which the contract is made.

Calculating the average

5.  Subject to paragraph 6, the average number of full-time employees shall be–

(a) the number of full-time employees, calculated by adding the numbers for each month (or, where sub-paragraph (b)(iii) of paragraph 4 above applies, for each day) comprised in the relevant period as they stood at the end of the final day of each such month (or day, as the case may be), and dividing the total by the number of months (or days, as the case may be); or

(b) where the relevant period is exactly one complete month or one day, the number at the end of the final day of that month, or the end of that day, as the case may be.

Aggregation with number of employees in associated businesses

6.—(1) A business shall be regarded as a large business where the average number of employees employed in that business when aggregated with the average numbers employed in all other businesses run by the same or any associated employer is more than 50.

(2) For the purpose of the application of this paragraph, the average number for each business run by the same or any associated employer is calculated separately.

(3) For the purposes of sub-paragraph (1) above, two employers shall be treated as associated employers if–

(a) one is a body of which the other employer (directly or indirectly) has control; or

(b) both are bodies of which a third person (directly or indirectly) has control.

(4) In sub-paragraph (3) above–

(a) “body” means a body of persons corporate or unincorporate;

(b) “control”, “directly”, “indirectly” and “third person” have the same meaning as in section 231 of the Employment Rights Act 1996(1).

(1)

1996 c. 18.