Key things you need to know about Lay-off and Short-Time working

18 March 2020
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As coronavirus disrupts large parts of the nation's workforce, here's a guide to your options while retaining your valuable employees

Although redundancy is an option in the face of a sudden downturn in business, there are a couple of alternatives which allow businesses to retain their staff, while reducing their immediate outgoings.

Broadly, laying off employees means that the employer provides employees with no work (and no pay) for a period while retaining them as employees; short-time working means providing employees with less work (and less pay) for a period while retaining them as employees. Unlike dismissal, it is a temporary solution to the problem of no or less work.

In order to send people home on Lay-Off and Short-Time working (LOST) then there needs to be an express clause in the contract saying that this is allowed. If an employer sends someone home from work without pay or gives someone less than half their work/pay, without a lay off or short-time working clause in the contract, there is a good chance of it being a constructive dismissal (albeit, whether it is likely that an employee will bring such a claim in the current economic climate is a different question), and/or an unlawful deduction of wages.

If you have a LOST clause in your employment contract

  • Even when on LOST employees don’t quite get nothing, they may still be entitled to a “guarantee payment” of £29 per day (£30 from 6 April). There is a maximum of 5 days of guarantee payment payable in a rolling 3-month period. So this is a maximum payment of £145 (£150 after 6 April) for a period of 3 months. So although it is a low sum, as an employer you do need to be aware of this.Holiday continues to accrue at the normal rate during any period of LOST.
  • If an employee isn’t available for work anyway, e.g. if they are unwell, then they are not treated as being laid off
  • If someone with more than two years’ service is laid off or on short-time working for either 4 consecutive weeks or for 6 weeks in a rolling 13-week period, the employee may be entitled to resign and treat themselves as dismissed on the grounds of redundancy, meaning that a statutory redundancy payment is payable. There is a very complicated procedure to trigger this:
  • Employee needs to send a letter within 7 days of hitting the trigger saying that they intend to claim a redundancy payment. If the employer does nothing within 7 days of getting that letter, the employee is then entitled to resign within the next 3 weeks and claim statutory redundancy
  • To stop the automatic redundancy payment– employer can send a letter back (a counter notice) within 7 days of getting the employee’s letter, saying that within the next 4 weeks they expect to return to normal for at least 13 weeks.
  • Employee has to give their contractual notice when resigning in order to get their redundancy payment.
  • It is possible for employers to structure their rota/payments in such a way as to avoid triggering the statutory redundancy procedure.
  • Deciding to invoke a lay-off/short-time working clause can be very difficult employee relations task. As with any such thing, effective communication with the employees is absolute essential. We recommend seeking advice at the outset to reduce risk in your business and ensure that it is handled in a sensitive and effective manner.

If you don’t have a LOST clause in your employment contract

Strictly speaking, you cannot lay people off or put them on short-time working without significant legal risk. However, you could seek to agree with the employee to amend their employment contract to include such a term. In the current climate, the employees may be amenable to this, especially if the communications are handled well.


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