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Lay-Off and Short-Time Working

Lay-Off and Short-Time Working

Sometimes businesses face an unexpected disruption or temporary downturn in work.  Whilst no-one wants this to happen it is often inevitable.  Therefore, having the right mechanisms in place to help mitigate the damage this can cause is crucial.

One of the key ways an employer can do this is to have a clause in their contracts of employment covering Lay-Offs and Short-Time Working.  The COVID-19 pandemic has shown us that anything can happen and nothing is impossible, and so employers can protect themselves by having these clauses in their contracts.

Ultimately, it is better to have it and never need it than to need it and not have it.

What is Lay-Off and Short-Time Working?

Lay-Off and Short-time Working clauses are mechanisms to enable businesses to overcome downturns in work and temporary disruptions.  They are short-term mechanisms, not long-term solutions.

Lay-Off clauses permit an employer to give no work to employees such that the employer can tell the employee to not attend work.  If you have an employee that works fixed hours but you cannot provide them with work then the employee is still entitled to be paid unless you can point to a Lay-Off clause and properly lay-off that employee.

Lay-Off clauses enable the employer to send home staff or tell them not to come in and to do this without pay (subject to Guarantee Pay, see below).

Short-Time Working clauses permit an employer to reduce an employee’s working time.  If you have an employee that works fixed hours but you cannot provide them with enough work to fill those hours then the employee is still entitled to be paid the full hours unless you can point to a Short-Time Working clause and properly reduce that employee’s working hours.

Short-Time Working clauses enable the employer to ask employees to come in later or leave early and to this without pay.

These however must be used in short-term because laying-off staff or reducing their hours can trigger redundancy rights (see below)

What Lay-Off and Short-Time Working is not?

The clauses can be used to assist business with temporary disruptions and downturns in work.  They are not mechanisms for challenging poor behaviour, poor performance, targeting individuals or seeking to make redundancies without going through the proper redundancy procedures.

Inappropriate use of Lay-Off and Short-Time Working clauses can, depending on the circumstances, lead to claims for unfair dismissal, constructive dismissal, breach of contract and even discrimination and detriments.

Always take proper advice before exercising employer rights under a Lay-Off or Short-Time Working clause.

Guarantee Pay

Lay-Off and Short-Time Working clauses enable employers to reduce working hours/days without pay.

However, employees are entitled to guarantee pay.  Days that are fully workless gives the employee a right to guarantee pay which is presently £30.00 per day for a maximum of 5 days in any 3-month period.

These means that guarantee pay will cost an employer a maximum £150.00 per employee in any 3-month period which can represent a huge payroll saving for many employees.  Thereafter, workless days are without pay.

In cases of Short-Time Working where the employee’s hours are reduced, the employee will be paid for what is worked and what is not worked is not paid.

Redundancy Rights

Lay-Off and Short-Time Working clauses should be used as a short-term mechanism.  To prevent these clauses being used as a long-term measure, the law provides employees with redundancy rights where the employee is laid-off or placed on short-time for too long.

An employee can request redundancy if they have been laid off for four or more weeks consecutively or six weeks in any period of 13 weeks.

An employee can request redundancy if they have been placed on Short-Time Working such that their weekly pay has been reduced by more than half for four or more weeks consecutively or six weeks in any period of 13 weeks.

Employees must serve a notice and employers can dispute this by serving a counter-notice.  However, strict time limits apply to both employees and employers regarding the serving of notices and counter-notices.  Therefore, employers should take proper advice from their Trusted Adviser as soon as possible if they receive a notice.

Conclusions

Lay-Off and Short-Time Working clauses can be a lift saver for business but must be used properly.  Always take advice from your Trusted Adviser before acting.

We would highly recommend having Trusted Advisers in your corner to help you.  Wilford Smith’s business focused services specialise in Employment Law, Commercial Law, Company Law, Commercial Conveyancing, Regulatory and Criminal Investigations.

We can be your Trusted Adviser in all areas.

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