Short-time working & lay-offs

An employer may only reduce an employee’s normal hours of work and reduce that employee’s pay accordingly if there is a specific term in the employee’s contract that allows for this.  The same applies to laying an employee off without pay.  Without such a provision, a unilateral reduction in hours or a lay-off would be unlawful.  If there is such a contractual provision, which is not uncommon within the manufacturing sector, an employer may introduce a period of short-time working or lay-off staff without pay in circumstances where there is insufficient work available for them to perform.   Short-time working and lay-offs are typically used to try to avoid having to make employees redundant, thereby protecting and preserving employment as well as protecting the employing organisation.

The following points need to be considered:

  • The selection of which employees are to be laid-off or required to work short-time should be based upon objectively justifiable commercial criteria;
  • Employees who are laid-off are normally entitled to receive the Statutory Guarantee Payment of £29.00 per day for up to 5 days in any three month period. The Guarantee Payment is payable by the employer.  For extended periods, employees may be eligible to claim Jobseekers Allowance via JobCentre Plus;
  • PAYE employees who are laid-off or who are unable to work because of the impact of the COVID-19 virus on their employer, in the period 1st March 2020 - 30th May 2020 will be entitled to receive 80% of their salary (up to a maximum of £2,500 per month), subject to the terms off the Government's emergency scheme announced on 20th March 2020;
  • If an employee has been laid-off or has received less than half his or her normal week’s pay for 4 or more weeks in a row, or for 6 weeks or more in a 13 week period, the employee may apply for redundancy.

In the event that an employer does not have an explicit provision for short-time working or lay-offs enshrined in their contracts of employment, such a measure can be implemented with the agreement of the employee(s) affected.  In exceptional circumstances, an employer may risk imposing the change unilaterally, but legal or other appropriate professional advice should be sought and taken before so doing.