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Lay-off and short-time working

In light of the prevailing situation regarding coronavirus, many employers are asking whether they can place employees on lay-off or short-time working. To help you understand what you can and can’t do, we have answered some FAQ’s on this topic below.

Please note, the guidance below is intended to be a summary of the current legal position. Advice should be obtained in relation to specific circumstances.

What is “lay-off” and what is “short-time” working?

Laying-off employees or imposing short-time working is often used as a temporary solution to the problem of no, or less, work, but what is the difference between the two?

Laying-off employees means that an employer provides employees with no work (and no pay) for a period whilst retaining them as employees. 

Short-time working means providing employees with less work (and at least 50% less pay) for a period whilst retaining them as employees.

In both cases, the employer must reasonably believe that the situation will not be permanent and must inform affected employees that this is the case.

Can an employer impose lay-off or short-time working on its employees?

To be able to impose lay-off or short-time working on your workforce, an employer needs to have a contractual right to do so. This means a specific lay-off or short-time working clause in a contract of employment, a collective agreement or a staff handbook (but only where it is clear that the terms of that handbook are contractual).  Wording in a non-contractual handbook may still be persuasive and advice should be taken.

A generic clause in a contract of employment allowing for the terms therein to be varied will not be sufficient and trying to rely on this alone to impose reductions in pay is likely to give rise to breach of contract claims.

Where there is a contractual right, affected employees need to be given advance notice of an employer’s intention to lay them off or place them on short-time working. There is no minimum notice requirement and exceptional circumstances, such as the coronavirus pandemic, are likely to justify a short notice period.

The position if there is no lay-off or short-time working clause is set out below.

If lay-off or short-time working is to be imposed, and if it is not going to apply to the whole workforce, employers should also exercise care when selecting employees and avoid potential discrimination. 

When does an employer have to make statutory guarantee payment (SGP)?

Employees may be entitled to an SGP on up to 5 “workless days” in a three-month period.

A "workless day" is a day during any part of which the employee would normally be required to work but doesn’t because there isn’t any work for them to do.

An employee will not be entitled to an SGP where:

  • They do not have at least one months’ continuous employment before the period for which they are claiming an SGP.
  • The workless day is due to industrial action.
  • The employee has unreasonably refused an offer of alternative work.
  • The employee does not comply with reasonable requirements imposed by the employer with a view to ensuring that their services are available.

SGPs are subject to a maximum daily rate, which is currently £29 a day (subject to a maximum of five days or £145 in any three months).

There is a specific method for calculating what SGP is due and so we suggest that you seek advice about what is to be paid before making any payment.

Is an employee on lay-off or short-time working entitled to a statutory redundancy payment?

If an employee has been laid off or placed on short-time working (or a combination of the two) for:

  1. 4 or more consecutive weeks; or
  2. 6 or more weeks within a 13-week period of which not more than 3 are consecutive

and they satisfy other relevant criteria, including that they have worked for their employer continuously for at least 2 years, the employee may notify their employer in writing of their intention to claim a statutory redundancy payment. The notice must be given at the latest within 4 weeks after the lay-off or short-time has ended. Just because an employee has a right to make this request, it does not automatically follow that the employee will. Longer periods should be handled in the same way as where there is no contractual lay-off or short-time working clause.

Within 7 days of the employee’s notice, the employer can give counter notice contesting liability to pay a redundancy payment. This applies if it is reasonably to be expected that within 4 weeks of the employee’s notice the employee will be permitted to work for at least 13 weeks without being laid off or placed on short-time for any week.

In the event of an employee giving notice of their right to a statutory redundancy payment, we can advise on the process and whether you can give counter notice in more detail.  

What if an employer has no contractual right to lay-off or impose short-time working?

If an employer closes the workplace or sends people who are willing and able to work home, an employer will need to pay the employees in full in the absence of a contractual right to lay-off or place on short-time working.

To simply impose either lay-off or short-time working without a contractual right to do so could amount to a fundamental breach of contract, entitling employees to resign and claim constructive unfair dismissal.  An employee does have to have 2 years’ continuous service to claim unfair dismissal. Alternatively, an employee who does not agree and has this imposed could bring a claim for unlawful deduction from wages.

Employers in this position would need to consult with staff with a view to obtaining their agreement to a temporary change to their terms and conditions to include reduced pay and/or reduced hours until there is more certainty about what will happen. Explaining to employees the impact that the current situation has had on the business, and the potential impact if the situation continues should encourage them to agree, if only to keep open the prospect of them having a job at all when the situation improves.

Constant communication is also key. Employees should be regularly updated on the position and when it may be possible to return to full pay and hours.

Can an employer require employees to take annual leave at this time?

An employer can decide when employees take their annual leave provided the employer takes account of the employee’s family responsibilities, opportunities for rest and recreation and gives employees notice of at least twice the length of holiday that the employees must take (e.g. if they are to take one week, they must be given at least 2 weeks’ advance notice). Some contracts of employment will also provide for the right to impose holiday periods on employees.

Future help

We are in a period of unprecedented territory but our employment team are here to help. If you find yourself needing to close the workplace (or having closure imposed upon you) or reduce overheads, please get in touch and we will do our best to help make the process as painless as possible.

UK Government advice is changing daily and is likely to continue to as the number of UK confirmed cases increases. If you have any concerns about protecting your workforce and pay arrangements for staff in isolation, call our employment team for advice. Telephone 0113 849 4000 or email employment@schofieldsweeney.co.uk.

About the Author

Annie Gray

Associate

Primarily acting for employers and senior executives, Annie advise PLC's, private limited companies,…

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