Lay-offs and short-time working – what you need to do if you suffer work shortages in your small business

In the current unprecedented environment it is becoming clear that many organisations and workplaces will either need to close completely for a time, or will not require the same level of labour as they usually do, for reasons beyond their control related to COVID-19. But what are your options for dealing with this? Here are some common questions to guide you to dealing with this appropriately and minimising your legal vulnerability.

What are lay-offs

A lay-off is a way of handling shortages of work without having to make redundancies. A reduction in the work the employee is engaged to perform meaning the employee is not required for a week means they may be laid off for the week.

What is short-time working?

Short-time working is similar, only where the employee works for some of the week (less than half) rather than being laid off the entire week.

Who can use lay-offs and short-time working?

If the contracts of your staff contain an express clause providing for lay-offs and short-time working, you can impose this and you do not need consent. It may also be possible to do it through custom and practice making this an implied term, if it happens often enough in your business, however this is risky and imposing it based on custom and practice is not advised and could lead to constructive unfair dismissal claims or claims for unauthorised deductions from wages.

What process do I use?

If you have contractual right to lay off or impose short time working, you should do the following;

Ideally meet with staff and tell them in person what is happening. This may of course not be possible if they are self-isolating or premises are closing at short notice.

Confirm in writing that you are exercising your right to do this, and make clear what the arrangements are for pay, how long you anticipate this continuing, arrangements for communication, details of any suitable alternative work available, details of any other temporary operational arrangements, and making sure staff know who to go to with questions.

What if there is no contractual provision?

If there is nothing in contracts saying you can lay staff off or put them on short-time working, you will need to obtain the specific consent of staff in order to do so.

Be very clear what you are asking of them, consult carefully, and give as much information as you can about how long it is likely to be for and what it means for their pay. It may sound unlikely that staff will agree, but if you are very clear about the alternatives, which may include redundancies, it may be easier to obtain consent than you think.

When obtaining consent staff should be provided with written confirmation of pay arrangements, anticipated timescales, communication arrangements, suitable alternative work, and full details of any other temporary operational arrangements during the period. They should also be made aware who they can approach with questions.

How long can I lay staff off for?

If you have a contractual provision for lay-offs or short-time working, there may be something about timescales in there, or at least there may be an implied contractual term that it will be only for a short time.

If no contractual provision, and you are seeking consent, it should be for as short a period as possible, and regularly reviewed. Openness about what is happening is key, and indefinite lay-offs without review would not be reasonable

What are ‘guarantee payments’?

If you have to lay staff off, they will usually be entitled to a statutory guarantee payment for any day in which they do no work at all. However you do not need to do this for every day they are laid off, as there is a limit of five days’ guarantee payments (or however many days they normally work in a week, if this is less) in any period of three months.

The guarantee payment amount is either their normal daily rate of pay, or the statutory maximum, which is going up from £29 to £30 for a day’s work in April this year.

If staff have been employed less than a month, or refuse suitable alternative work you may be able to offer them, or don’t comply with a request to be available for work, you don’t need to give them statutory guarantee pay.

Claiming redundancy pay

It can be possible for staff who are laid off or put on short-time working to claim redundancy and therefore receive redundancy pay. This can only happen where they have been laid off or put on short-time working for either four consecutive weeks, or for a total of at least six weeks in any 13 week period.

An employee needs to give written notice that they are claiming redundancy pay. If you don’t wish to make the payment, you can serve what is called ‘counter-notice’.

Ultimately it could be decided by a tribunal whether you have to pay or not, and a tribunal would want to see evidence that at the time the claim was made, you reasonably expected to be able to employ staff again on their usual terms for at least 13 weeks continuously within four weeks of receiving the notice.

 

If your business is suffering a decline or needs to close workplaces as a result of COVID-19, and you’d like some advice on handling this, do get in touch.