This post was updated on 20th March 2020 - Please see below.

Whilst relatively common within the manufacturing sector, contractual provisions that allow for workers to be put on short-time working or laid off at times where there is insufficient work for them to do are quite rare in other sectors.  As the Covid-19 outbreak is likely to have a significant impact on all sectors, business survival may depend on the flexibility an employer has to balance salary costs against a drop in revenues.  Whilst it may appear to be a draconian measure, laying-off staff and/or introducing a period of short-time working may help to ensure that a business can survive a downturn in activity.  This in turn serves to protect and preserve the employment of those working within the business.

If existing employment contracts do not already provide for it, introducing a change to terms & conditions to allow the employer to impose a period of lay-offs or short-time working should be relatively straightforward, if handled carefully and sensitively and in consultation with affected employees.  Short-time working would be accompanied by a commensurate reduction in salary, and lay-offs would typically be without pay.  Affected employees may be eligible to claim some financial support in these circumstances through the benefits system and, in the event of a lay-off, Guarantee Pay (which is currently a paltry £29.00 per diem, payable for a maximum of 5 days in any three month period).  A relevant clause could be circulated as an amendment to terms and conditions of employment by way of either a memo or a side letter, rather than necessitating the issue of a revised contract of employment.  However, if this is a unilateral change to terms of employment, employees may not agree to the change and raise a formal objection, making the change unlawful.  If no objections are raised and employees continue to work under these revised terms, it is likely that there has been an implied acceptance of the revised terms.  This implied acceptance can be relied upon to a certain extent, provided that an employee does not notify his or her employer that he or she is continuing to work ‘under protest’.  Objections or ‘under protest’ notifications should be handled within the framework provided by the organisation’s grievance procedure.  The ultimate sanction that could be applied, in the event of an absolute refusal to work under the revised terms, could be the dismissal of the employee (following the ACAS Code of Practice in effecting this) and immediately following this up with an offer of re-employment under the new terms (which include the provision for short-time working or lay-offs).  The effect of such a dismissal/offer of re-employment would limit the potential loss an employee could claim to the difference between the financial value of the old terms of employment and the new.

Short-time working and lay-offs are drastic measures to take.  They will inevitably have severe financial consequences for affected employees.  We would imagine that most employers will wish to exercise a degree of social responsibility and treat them as being very much a last resort.  Before implementing such measures employers may wish to satisfy themselves that they have investigated and exhausted the measure the Government have announced to support businesses during this crisis. 

UPDATE: 20th March 2020.  The government has now announced that is will underwrite 80% of the wages (up to a maximum of £2,500 per month) for all employees paid under PAYE who are unable to work due to the Covid-19 virus provided that their employment is maintained by their employer.  This applies to all employees regardless of the size of their employer and will be backdated to be effective as of 1st March 2020 and will initially be for a three month period from that date.  Whilst details of how the scheme will work have yet to be released we would imagine that this will apply to employees who are laid-off (as an alternative to redundancy) such as those affected by businesses which have been instructed to close because of the outbreak (pubs, restaurants, gyms etc.) and where a drop-off in business because of the outbreak has resulted in a commensurate reduction in work. We will update this post with further detail as and when it comes available. 

We believe that lay-offs will still need to be provided for in Contracts of Employment, and we are able to provide support and guidance for organisations that may believe that they may need to introduce such measures.  A policy providing for short-time working and lay-offs can be downloaded for free from here (n.b. this does not include arrangements under the Government’s Job Retention Scheme).  A generic draft memo introducing this policy for the purpose of the Covid-19 outbreak (which does include a reference to the scheme) can be downloaded, also for free, by following Covid-19 document downloads link.  Alternatively, you may contact us for further guidance.

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