We are understandably getting a lot of questions about this. Firstly I will confess that although we draft it into our standard contracts I have NEVER in 25 years of HR had to implement it with a business so I’ve done a lot of reading today!
Please do your own due diligence as well as not paying people correctly could lead to a breach of contract claim. The first thing to be aware of is if you don’t have a clause in your contract regarding this you are unlikely to be able to rely upon it – you have a statutory right to not provide people with any work (so make savings on operational costs if you shut up shop) but you’d still have to pay their salaries. If you want to rely on an unpaid layoff or reduced hours and pay then it needs to be an express or implied term of your contract. Or you can negotiate and agree any such arrangements with employees if there is no contractual term.
The Gov advice on this is here https://www.gov.uk/lay-offs-short-timeworking
ACAS guidance is a little more detailed but still easily readable https://archive.acas.org.uk/media/314/Advice-leaflet—Lay-offs-and-short-time-working/pdf/Lay-offs-and-short-time-working-accessible-version.pdf
If you want it straight from the horse’s mouth – here is the legislation https://www.legislation.gov.uk/ukpga/1996/18/part/XI/chapter/III
I copy below guidance from the HR guidance we use:
There is no statutory right to lay-off employees or put them on short-time working. Employers can impose a lay-off or short-time working arrangement only if there is an express or implied contractual right to do so. To do so, in the absence of any express or implied contractual right (or collective agreement) to the contrary, or without the employees’ express agreement, would be a breach of contract. This could lead to claims for damages or complaints of unfair constructive dismissal.
Employers without a contractual term in financial difficulties or with empty order books may, of course, approach employees asking them to agree to being laid off or kept on short-time working until matters improve – as the more desirable alternative to redundancy.
However, employers in financial difficulties may ask employees to agree to being laid off or kept on short-time working, but they may not take this action unless the employees agree. Employees may be prepared to accept a period of lay-off or short-time working if they are aware that the alternative could be redundancies.
Subject to satisfying the eligibility conditions, employees who have been laid off or put on short-time working may be entitled to receive a statutory guarantee payment and/or to claim a statutory redundancy payment.
The legal provisions on lay-off and short-time working are complex and are set out in ss.147 to 154 of the Employment Rights Act 1996.
Meaning of lay-off and short-time working
In brief, an employee is laid off during a particular week if the employer does not have sufficient work for the employee and the employee is not paid as a result. Employees are treated as having been laid off in any week if in respect of the week they are not entitled to any remuneration under their contract because they have not been provided with any of the work on which their remuneration depends.
Short-time working occurs when the employer does not have sufficient work and the employee works fewer days or fewer hours than normal and receives less than half a normal week’s pay.
Employees who are laid off or kept on short-time working may be entitled to receive statutory guarantee payments. The maximum guarantee payment payable to an employee is currently £29 and will increase to £30 in respect of any workless day on or after 6 April 2020. The right to a statutory guarantee payment arises where an employee is not provided with work throughout a day or shift on which, in accordance with the employment contract, he or she is normally required to work, because:
- there is a reduction in the requirements of the employer’s business for work of the kind that the employee is employed to do; or
- any other occurrence affects the normal working of the employer’s business in relation to work of the kind that the employee is employed to do.
Such a day is referred to as a “workless day”. A day on which an employee does some work (even if only for a few minutes) is not a workless day.
To qualify for a guarantee payment in respect of a workless day, an employee must have been continuously employed for a period of one month or more ending with the day immediately preceding the day in question.
The amount of a guarantee payment in respect of a day is calculated by multiplying the number of normal working hours on the day by the guaranteed hourly rate, ie a week’s pay divided by the number of working hours in the week. However, the amount is subject to a maximum. The maximum guarantee payment payable to an employee in respect of any workless day is £29 (from 6 April 2020 £30). An employee is not entitled to guarantee payments in respect of more than the “specified number” of days in any three-month period. The specified number of days is the number of days, not exceeding five, on which the employee normally works in a week under the contract of employment. Where the number of days worked varies from week to week, the specified number of days is the average number of days, not exceeding five, worked over the preceding 12 weeks.
An employee who is laid off or on short-time working may be entitled to claim a statutory redundancy payment provided that they satisfy the other eligibility requirements.
Imposing a lay-off or short-time working (within the statutory definition), even with the contractual power to do so, can give employees the right to terminate their employment and claim a statutory redundancy payment. The legal provisions are complex and can be found in ss.147 to154 of the Employment Rights Act 1996. In summary, if an employee receives no pay or less than half a week’s pay due to lay-off or short-time working for four or more consecutive weeks, or for six or more weeks (where no more than three weeks are consecutive) within any 13-week period, they will be entitled to claim a redundancy payment without actually being made redundant
Notice of intention to claim
An employee will be eligible for a redundancy payment if they give notice in writing to the employer indicating their intention to claim a redundancy payment within four weeks of being laid off or kept on short-time working for:
- four or more consecutive weeks; or
- a series of six or more weeks (of which not more than three were consecutive) within a period of 13 weeks (s.148 of the Employment Rights Act 1996).
An employer may contest it has any liability to pay the employee a redundancy payment if it serves a written counter notice within seven days of service of the employee’s notice of intention to claim. However, an employer may base the counter notice on the sole ground that, on the date the employee served their notice of intention to claim, it was reasonably to be expected that they would, not later than four weeks after that date, enter into a period of employment with the employer:
- of not less than 13 weeks; and
- during which they would not be laid off or kept on short-time working.
An employee will not be entitled to a redundancy payment for being laid off or kept on short-time working unless they give the required period of notice before the end of the relevant period. The period of notice required is one week unless the contract specifies more than a week, in which case it is the minimum notice period specified in the contract.
The relevant period is:
- if the employer gives no counter notice within seven days of the service of the notice of intention to claim, three weeks after the end of those seven days;
- if the employer gives a counter notice within seven days but subsequently withdraws it, three weeks after the service of the notice of withdrawal; and
- if the employer gives a counter notice within that period of seven days and does not withdraw it, and a question as to the right of the employee to a redundancy payment is referred to an employment tribunal, three weeks after the tribunal has notified the employee of its decision on that reference.