Lay-off and Short-time Working: A Guide for Employers

Lay-off and short time working are temporary alternatives to redundancy which may become necessary for some businesses during the Coronavirus (COVID-19) pandemic. Whether you are ordered to close your business, or you have a reduction in customers (whether advised or otherwise) and revenue, then lay-off and short time working may be the only option.

What do we mean by lay-off and short time working?

Lay-off - a week in which no work is carried out. A “workless day” is a day in that week where no work is carried out.

Furloughed Worker - a new term introduced by the UK government, providing the opportunity to claim up to 80% of salary from the government if the employee is laid-off.

Short-time working - a reduction in working hours. This could be part of the week where no work is carried out or it could be shorter hours on the normal working days.

Both lay-off and short time working are imposed by the employer as a result of reduction in business or business closure.

This does not cover individuals who are opting to stay away from work, are sick or are advised to self-isolate, see our Coronavirus (COVID-19) - Advice for Employers article for information on this.

Do we have the right to impose lay-off or short time working?

Employers can only impose lay-off or short time working on employees if they have a contractual right to do so. Ideally this will be an express contractual term. In limited circumstances you may be able to rely on an implied (non-written) term.

As a nation, we have experience of lay-off and short time working from to the 2008 recession. Before that time, many employers didn’t have contractual clauses allowing the right to lay-off or impose short time working. These clauses benefit employees by helping to keep them in employment, avoiding redundancies whilst also reducing the recruitment costs of getting businesses back up and running following reductions.

Even with a contractual right, caution should be taken in how you impose lay-off and short time so as to not breach the implied term of trust and confidence. This is about communication. If there is a risk of lay-off or short time working, communicate this to your employees.

If lay-off or short time working is imposed without a contractual right, you risk employees making a claim to the employment tribunal for an unlawful deduction of wages and if over 2 years service they could resign and claim constructive unfair dismissal.

Without a contractual right employers must get written consent from employees to agree to lay-off or short time working. Whilst in normal circumstances it would be unlikely an employee would agree to this, in current times if you discuss the situation with employees and focus on how you will move the business forward and get it back up and running once the pandemic is over people may agree to avoid losing employment altogether. The furlough scheme providing payment of some wages has also helped employers to gain agreement.

What notice do we need to give?

There is no formal requirement to give notice assuming you have the contractual right, however you must act reasonably to ensure you don’t breach the implied term of trust and confidence.

These are uncertain times. Employees will be anxious so provide as much information as you can about what the business is doing now and the plans going forward. Inform people exactly how this will affect them. Explain the implications for their pay. Advise them to contact Jobcentre Plus for advice about any financial help that may be available.

Decisions about short time working and lay-off must be kept under review and communicated to employees.

What about pay?

Under the Coronavirus Job Retention scheme workers who are not performing any work for their employer can be paid 80% of their wages up to a cap of £2,500 per month. Anyone not covered by the Coronavirus Job Retention Scheme (for example those on short-time working) will need to be paid in line with current legislation on lay-off.

Employees who have a complete “workless day” may be entitled to statutory guarantee payments. Up to a maximum of 5 days can be paid in any three month period.

Part time employees can only receive statutory guarantee payments for their normal contracted number of days in a week (i.e. if they normally work a 3 day week they can only get 3 days of statutory guarantee pay).

Any days in which work is carried out will not attract statutory guarantee payment. Therefore if hours are reduced each day rather than imposing full days with no work then no statutory guarantee pay will apply.

If salary or part salary is paid during a period of lay-off this can include statutory guarantee pay.

In short time working, all time worked must be paid.

Statutory guaranteed pay from April 2020 is £30 per day. If this is higher than the normal rate of pay for an employee then the normal rate of pay will apply.

Is there a limit on the amount of time we can impose lay-off or short time working?

Employees may be able to claim redundancy after they have been on lay-off or short time working for four consecutive weeks, or a total of 6 weeks in a 13 week period.

If employees give notice to claim redundancy there are circumstances where employers can give counter notice. In this situation we recommend you take advice specific to your situation.

At this time keeping the support of your workforce is important. Keep communicating with them and informing them of all actions the business is taking. Ideally you can keep them on side to support you when the pandemic is over and business is growing again.

Article last updated: 23 April 2020