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Lay-Offs, Short-Time Working and Guarantee Payments Overview

Laying off employees or putting them on short-time working can be useful temporary solutions to reductions in work levels to save employers money, rather than considering making employees redundant. This document provides an overview on what is meant by these options.

For further information on how to implement these solutions, see Lay Offs, Short-time Working and Guarantee Payments Factsheet [FS26.02].

What is meant by laying off employees?

People often refer to being “laid off” as a colloquial way of saying that they have been made redundant. However, redundancy is a permanent decision to end someone’s employment. The technical meaning of “laying off” is where a worker is retained as an employee, but the employer provides no work or pay for the employee on a day when the employer would normally do so, because of a diminution in the employer’s business for work of the kind which the employee is employed to do.

What is short-time working?

Similarly, short-time working is where an employee is provided with work and pay for some of the week, but is laid off on other days of the week.

Both lay-off and short-time working are intended to be temporary solutions to a reduction in work of the kind the employee is employed to do. These situations rarely apply indefinitely and the employee may be entitled to either a guarantee payment or to a statutory redundancy payment in certain circumstances (see below briefly, or see Lay Offs, Short-time Working and Guarantee Payments Factsheet [FS26.02] for detailed information).

Can a lay-off or short time working be imposed?

If an employee’s contract of employment contains an express contractual right for the employer to impose a lay-off or short time working, then this is binding on the employee. See Template clause for insertion into contract of employment [T26.01].

Where there is no existing contractual right, the express consent of the employee is needed for the employer to make use of lay-off or short-time working. The employee should be made fully aware of to what exactly he or she is consenting and it is recommended that, for the avoidance of doubt, any consent is obtained in writing. See Letter obtaining consent to lay-off or short-time working [SL26.01].

If there is no existing contractual right to impose lay-off or short-time working and the employee will not consent, the employer would be in fundamental breach of the employee’s contract of employment if they sought to impose a lay-off or short time working.  If the employee has at least two years’ service, they may resign and claim constructive dismissal. If successful, the employee could be awarded compensation of a basic award and a compensatory award based on their financial losses of up to one years’ pay or the statutory cap, whichever is the lower (see Statutory Rates and Limits Table).

Redundancy payments for lay-off and short time

Employees with two or more years’ service may be entitled to claim statutory redundancy payments if they are laid off without pay, or put on short-time working (which, for these purposes, means where they are on less than half a week’s pay), for four consecutive weeks, or for six weeks (of which no more than 3 are consecutive) within a block of thirteen weeks. An employer can contest such a claim if they reasonably expect to be able to provide at least thirteen weeks’ continuous employment, without further resort to lay-offs or short-time working, within four weeks of the date of service of the employee’s notice of intention to claim.

For more information, see Lay Offs, Short-time Working and Guarantee Payments Factsheet [FS26.02].

Guarantee payments

Most employees are entitled to a statutory guarantee payment for any complete day of lay-off or short-time working (a ‘workless day’).  This is limited to a maximum of five days’ payment in any three-month period (or, if the employee works part-time, to the number of days the employee is usually required to work per week under their contract of employment).

The amount of the guarantee payment is the employee’s normal daily rate of pay up to a statutory maximum which changes annually (see Statutory Rates and Limits table for the current maximum).

Employees can complain to an Employment Tribunal if an employer fails to pay part or all of any guarantee payment to which they are entitled. The complaint must be made within three months of the day for which a guarantee payment is claimed. 

It is automatically unfair to dismiss an employee because he or she tries to assert a statutory right to a guarantee payment. This right applies regardless of the employee’s length of service.

For more information, see Lay Offs, Short-time Working and Guarantee Payments Factsheet [FS26.02].

This document has been created by, or on behalf of ESP Ltd, as a general document and as a guide in relation to its subject matter and has not been bespoke drafted for you or the specific circumstances in which you are looking to use it. Prior to using this document and undertaking any HR process you must consult your organisation’s own policies and procedures to ensure that you do not do anything in conflict with your own policies and procedures.  If in any doubt as to how to use this document or, if you require any legal advice, please feel free to contact ESP Ltd on 0333 006 2929 and our legal team will be more than happy to assist.  ESP Ltd will not be liable in any way for any actions undertaken by you or your use of this document unless we have been consulted regarding your use of this document as legal advisor to your business or have bespoke drafted any documentation in response to a specific support request.

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