What is Lay off and Short-time working?

An alternative to redundancy?

Often when employers do not have the work or hours for their employees, they will follow the standard redundancy process on the basis that they can no longer support the employee in their role. However, a business that frequently undergoes quiet periods may be keen to retain their workforce and as a result may consider imposing lay off or short-time working on employees.

Whilst this option may help avoid redundancies, employers should be mindful of the recourse for an employee should they be subjected to lay off or short-time working for an unreasonable period. 

When is an employee laid-off?

 An employee has been laid off for a week if both of the following apply:

• The terms of their employment contract provide that whether or not they are paid depends on their employer providing them with the work they are employed to do.
• They are not entitled to any remuneration that week because their employer does not provide work for them.

What is short-time working?

An employee has been put on short-time working for a week where both of the following apply:

• By reason of a reduction in the work provided for the employee by the employer (being work of a kind which under the contract of employment the employee is employed to do).
• The employee’s pay for the week is less than half a week’s pay.

When can an employee can be laid off or put on short-time working?

The general rule is that an employer can implement a period of lay off or short-time working at any time if the contract permits them to do so.

As well as a contractual provision, this can also be implemented through the custom and practice in the workplace, or through agreement.

Without a clause in the employees contract or a custom and practice employers will be in breach of contract .

In March 2020 during the early days of covid when people were told to stay at home, but no furlough scheme was implemented (remember those few days of panic!), employers without a lay-off or short-time working clause were faced with the prospect of  making redundancies or being in breach of contract by not paying or providing work for employees. Fortunately the furlough scheme resolved this for all, but it served as a reminder that there may be unforeseen incidents or issues that arise when you may need the flexibility to be able to lay-off employees for a short period.

What are the employees’ rights if they are laid off or on short-time working?

Unless an employee is an irregular or part hours worker, they will continue to accrue holiday in the normal way during a period of lay off or short-time working. As well as this they will continue to receive statutory sick pay as they would during a normal period of sickness.

Whilst in a period of lay off or short-time working the employee will be paid a statutory guaranteed payment. The maximum statutory guarantee pay is currently £39 per day for 5 days in any 3-month period.

Is there a limit on how long an employee may be laid off for?

There is no limit for employers on the duration to implement lay off and short time working, however, in an effort to protect employees from being kept off for an unreasonable period, an employee can make a claim for a statutory redundancy payment.

For an employee to make an application for a statutory redundancy payment, they have to be laid off or kept on short-time working for either:

• Four or more consecutive weeks.
• A total of six weeks (of which no more than three are consecutive) in any period of 13 weeks.

To make a claim for a redundancy payment the employee must follow the process under the provisions of S147 to 154 Employment Rights Act 1996, as follows:

• An employee must have two years’ continuous service (calculated up to the last day of the week of lay-off or short-time working on which they are relying)
• They must have spent the necessary length of time on lay-off or short-time working (or a combination of the two)
• The employee must serve written notice of their intention to claim
• An employer that wishes to contest a claim (on the basis that there is a reasonable expectation of a return to normal working) must serve a counter-notice
• If the employer serves a counter-notice, the employee must apply to a tribunal to decide their claim at a hearing
• If the employer fails to serve (or serves and then withdraws) a counter-notice or the tribunal upholds the employee’s claim, the employee must resign with notice

Summary

If you are considering imposing lay off or short-time working, consider the duration that you anticipate the arrangement lasting. As well as the duration, consider the selection process and try to be as objective as possible so as to avoid any claims for discrimination or breach of the implied term of mutual trust and confidence.

If you cannot foresee there being a genuine prospect of an upturn in work, or feel that no fair process can be followed, you may be better placed to proceed down the formal redundancy route.

Our team are able to assist with a range of enquiries and HR support. If you have concerns in respect of implementing lay off or short-time working and would like any support, please contact us on 01983 897003.