Lay-offs and short time working

These written reasons can later be used as evidence at an employment tribunal. Failure to provide reasons in writing can lead to a tribunal award of up to two weeks’ gross pay.

References

You may be asked to provide a reference on or after the termination of an employee’s employment, however you have no legal obligation to do so, unless the contract specifies otherwise, or you are in a regulated industry.

Great care should be taken when writing a reference. You must ensure it is true, accurate and fair to avoid potential legal action by either the employee or the new employer. See the sample reference template for more information on supplying references.

Template 8.1 – Letter giving a reference

Lay-offs and short-time working

As an employer, you may choose to place employees on short-time working or have to lay off all or some employees, should a situation arise where there is a shortage of work.

However, if you lay off employees without any contractual provision, this will be a breach of contract unless you are able to demonstrate that you are able to assert this right via custom and practice (even if you have an ‘agreement’ this will still need to be referenced in contract). It would be constructive dismissal if the employee resigned in response to such a breach (and they may be then able to claim a redundancy payment).

Lay-offs

Laying off means telling an employee not to come into work for at least a day. You will generally be entitled to do this and it can be a useful alternative to dismissing employees by reason of redundancy.

However, if you do not handle the lay-offs carefully, you could face claims such as unfair dismissal (if the employee has two year’s service), unlawful discrimination, breach of contract and unlawful deductions from wages.

Laid off employees are still entitled to be paid, unless you have the contractual right to withhold payment. This right can arise in a number of ways:

If you obtain the employee’s verbal or written agreement.

If you have negotiated an agreement with the trade union.

If there is a national agreement for your particular industry.

If there is clear evidence that unpaid lay-offs are an established custom and practice.

Even if you have the right not to pay full salary during a period of lay off, most employees will be entitled to Statutory Guarantee Pay which is currently £30 a day, for 5 days in any three month period.

Try to be as transparent as possible, both in terms of your decision to lay people off and how you implement your decision. Employees are likely to be more receptive to your proposals if they understand why you need to lay people off, particularly if they understand that you are trying to safeguard their jobs in the long term.

Employees who believe that they have been unfairly singled out are far more likely to bring claims against you. You should therefore:

Consider requesting or requiring employees to take annual leave instead of laying them off, or implementing short time working (where an employee’s contractual hours are reduced).

Carry out a fair selection process before deciding who to lay off, and document this.

Consult with employees or their representatives - use similar letters and guidance to the redundancy template.

Obtain letter agreement to lay off (see template 7.13).

Template 7.13 – Lay off notification and acceptance letter

If you are considering laying off skilled employees, there is a risk that they could show that they are entitled to be provided with work. If their contract does not expressly allow you to lay them off, you should therefore make sure that you obtain their consent before doing so (whether or not you pay them).

In certain circumstances (particularly, in relation to piece rate workers), employees could claim that they are redundant after a period of lay-off and claim statutory redundancy pay. They must notify you in writing of their intention to do this. If you believe that you will have work for them soon, you must respond to this notification within seven days or else you will be deemed to have agreed to their claim.

Finally, if you know that redundancies are inevitable, do not try to use lay-offs as a means of avoiding paying redundancy payments. This could lead to employees resigning and claiming constructive or unfair dismissal and therefore could cost you a lot more than if you went through a fair redundancy process.

Lay-off pay

If an employee is laid off or placed on short-time working, he or she is entitled to a guaranteed payment for the days that he or she is excluded from working. Guaranteed pay is payable for the first five workless days in any three-month period.

Guaranteed pay is payable at the current statutory rate of £30.00 per day for five days in any three-month period. However, if an employee’s daily wages are less than the current guaranteed pay statutory rate, he or she is entitled to the normal rate of pay, whichever is the lowest. The rate for statutory guaranteed pay is increased each February.

If the lack of work is a result of a strike or other industrial action involving an employee(s) from your company or an associated company, guaranteed pay may not be payable.

Normal wages/salary need not be paid to employees who are laid off if the contract of employment expressly confirms that this is the case.

Lay-off leading to redundancy

If an employee has been laid off for a continuous period of at least four weeks, or for a period of six non-consecutive weeks in any 13-week period, he or she will be entitled to claim redundancy pay. He or she must follow certain steps to claim this.

Short-time working

Short-time working occurs when employees are laid off for a proportion of their normal number of contractual hours or days per week. As in the case of lay-offs, you must have an express or implied right to place employees on short-time working and to lawfully reduce their pay.

Note: Where you do not have an express or implied right to place employees on short-time working, employees may make a claim to an employment tribunal.

Furlough

As a result of the Coronavirus pandemic, many employees were placed on furlough. This is a temporary leave of absence and a percentage of employees wages paid by the government.

In order to protect employees, a new law was passed in July 2020 to ensure that furloughed employees receive statutory redundancy based on their normal wages, and not the reduced furlough rate.

This applies to employees with more than 2 years continuous employment.

The legislation also applies to Statutory notice pay, employees must be given a notice period before their employment ends following redundancy. This can be from one weeks notice up to 12 weeks, depending how long they have worked. During this notice period the employees must be paid.