Short-time working and lay-offs – what’s the difference?

Many small businesses are having to decide between putting staff on shorter hours or laying people off. Employment lawyer James Simpson explains the difference.

As Covid-19 continues to spread across the UK, many firms have seen an extreme reduction in business. Social distancing measures introduced by the government may cause a decline in sales, as well as employees choosing to self-isolate, therefore slowing production.

To try and soften the impact, businesses are having to make the decision to let employees work from home or requiring them to take annual leave.

Badly affected businesses, however, may need to take further steps, such as reducing work hours or staff numbers.

To ensure your business stays compliant, here are some steps you need to make:

Look at your options

When deciding between short-time working and lay-offs, it’s crucial that you understand the difference between both, and what they could mean for your business and staff. “Short-time working” is when employees are provided with less work and less pay for a short period. “Lay-offs” are when employees are not provided with any work or pay for a short period, but are kept on as employees.

These are both temporary cost-cutting measures you may use when there is not enough work to go around. Short-time working and lay-offs can help you avoid dismissals or permanent redundancies, while reducing the burden on your business.

>See also: 7 ways to cut staff costs during the coronavirus crisis

Contracts must be checked

You can only lay off staff or put them on short-time working with reduced pay if there is a term in the employment contract (or collective agreement) permitting this. In industries where these measures are common practice, the right to use them may be implied, even if it is not written out in the contract.

If there is no clause permitting lay-offs or short-time working, using these measures will be a breach of contract, and the employee will be entitled to resign and claim constructive dismissal.

Be clear on what you should pay your staff

Any lay-off clause in the contract should state that no pay is due during the lay-off period. If there is no lay-off clause, you should usually pay staff full wages during any period in which staff are not working, in order to avoid breaching the contract. However, this may be unaffordable to many employers.

You should check the employment contract, which may state how much the employee’s pay can be reduced by. Short-time working occurs when an employee’s weekly remuneration is reduced to less than half a week’s pay because of a shortage of work. If the contract guarantees a “fall-back” rate of pay that exceeds half a week’s pay, the employee will not be on short-time.

You may alternatively be required to pay a statutory guarantee payment for up to five “workless days” in any three-month period where an employee is not provided with work.

>See also: 6 tips for cash flow management during the coronavirus crisis

How long to keep measures in place

Any lay-off or short-time working clause in the contract will state how long you can implement these measures for. After a certain length of time, the measures can be considered a full redundancy. This will be the case if an employee is laid off or kept on short-time working (or a mixture of both) for at least four consecutive weeks or six weeks over a 13 week period. Eligible employees can then resign and claim statutory redundancy pay from you.

Other things to consider

You should also be aware that once laid off, staff may not be available to immediately return to work when needed. If the coronavirus situation in the UK changes quickly, you may incur costs when bringing back staff after a temporary lay-off.

You will also need to report to the Home Office within 10 working days of any decision to lay off or require short-time working if any affected employee is a visa holder. The decision may also affect that employee’s visa status.

These measures may be essential to keep your business ticking over whilst retaining jobs. However, this can be a delicate area of law which requires careful handling. If in doubt, speak to a legal professional who will be able to advise the best course of action.

James Simpson is head of employment at Blaser Mills Law

Further reading on coronavirus

How to ask for a commercial rent freeze from your landlord

Related Topics

Coronavirus
Employment Law