Short-time working and lay-off
During periods of economic uncertainty, and particularly in view of the sudden and significant impact of COVID-19 on many sectors, employers may want to consider some alternatives to redundancies – in particular laying off employees or imposing short-time working in accordance with the provisions of the Employment Rights Act 1996.
The aim is to ensure that employees remain employed during these periods, but the employer can make a short term saving of labour costs and also have the flexibility to reinstate the workforce when trade starts to pick up, writes Liz Stevens, Professional Support Lawyer at Birketts LLP. The advantage for employees is that this can be an attractive alternative to being made redundant.
What is short-time working and lay-off and when can it be imposed?
An employee treated as being on short-time working under the statutory provisions will have a reduced number of days or hours and will receive less than half of their normal week’s pay. An employee who is laid off will be required to stay off work completely for a temporary period of at least one day, unpaid.
It is important to note that employers can only impose short-time working or lay-off only where there is an express or implied contractual right to do so. In practice it is quite rare for contracts to include an express provision for short-time working or lay off.
Unless there is clear and established practice of having done this in the past which has given rise to an implied contractual right, imposing adjustments to working hours/days is a potentially risky strategy for employers.
What is a guarantee payment?
An employee placed on short-time working or laid off may be entitled to be paid a statutory guarantee payment, for up to five ‘workless days’ in a three month period.
The guarantee payment is subject to a maximum daily rate, which is currently just £29 per day or £30 per day from 6 April 2020 (subject to a maximum payment of five days or £145 (£150 from 6 April 2020) in any three months).
Employees’ statutory holiday continues to accrue during a lay-off or short-time working period provided the contract is not broken.
If any employee resigns or is dismissed during the lay-off or short-time working period, they will usually be entitled to be paid their normal salary during the applicable notice period.
There is no limit on the duration of statutory lay-off or short-time working. However, statutory redundancy pay can be claimed by eligible employees if the period of lay-off or short-time working (or a combination of the two) has lasted:-
- Four or more consecutive weeks; or
- Six weeks (of which no more than three are consecutive) in a 13-week period.
Note that for redundancy purposes, an employee is only treated as on short-time working for any week if he is paid less than half of his normal remuneration.
To claim a redundancy payment, an employee is required to serve a written notice on the employer of intention to claim. An employer can serve a counter-notice if it is reasonably expected that the employee will be able to return to work within a period of four weeks.
What if there is no contractual right to impose short-time working or lay-off?
If there is no express or implied contractual right to impose lay-off or short-time working employers could seek to mutually agree variations in hours and/or days of work with their employees, commensurate with a pay cut, on either a temporary or permanent basis.
Where this is done it is important to put it in writing and obtain signatures from employees to demonstrate their agreement to the changes.
If any changes to employees’ contractual hours or pay are imposed without gaining their agreement, they could seek to pursue various claims against the employer including: constructive unfair dismissal, breach of contract and/or unlawful deductions from wages.
• For more information call Liz Stevens on 01603 756474 or email: liz-stevens [at] birketts.co.uk