Temporary Redundancy, Lay-offs and Short Time Working

By April Harrington.
05 Feb 2021

As a result of business downturn, it may seem like you will have to make employees redundant. While sometimes this is the case, there are some other options.

You can avoid losing valuable employees while also keeping the business healthy. This is through temporary redundancy, lay-offs and short term working.

These options may help avoid redundancies in the long run. But this should be a last resort for employers. Law still protects laid-off workers from unfair lay-offs, as it does with redundancies.

Let’s look at how laying employees off work can be a viable alternative to permanent redundancies, and how you can implement the process.

What are lay-offs and temporary redundancies?

A temporary lay-off in the UK is a temporary form of redundancy. Where there is a removal of an employee from your business.

Law only classifies a period of lay-off as a statutory lay-off when you haven’t paid them for a week and you don’t provide them with work (where their pay depends on carrying out work.)

For example, when you don’t provide work to an employee who you pay an annual salary. You can’t put them on a statutory lay-off as their pay isn’t dependent on you providing them with work. ­

What is short-time working?

It’s when you reduce hours of employees so they receive less work and pay from their employer

Unpaid short-time working can be useful for your business in the event there’s less work available. Or if more serious events are taking place—such as with the coronavirus pandemic.

How does short-time working in the UK work?

You decide to place employees on fewer hours. So they’ll receive less than half a week of pay. Laying off staff or short-time working can help avoid redundancies - but you have to agree to this with staff first If there is not a clause in their contract permitting you to do this.

This can also apply if the business premises is temporarily closed (e.g. due to flooding, fire, power supply failure).

When can you put employees on temporary redundancy or short-time working?

Laying people off or short-time employment will not apply if they are a temporary worker, only if they’re an employee according to their contract.

By law, you can lay-off employees or put them on short-time working if there is a lay-off clause in their employment contract

If you agree to change the contract, provide the employee with one month’s notice of the change. And confirm this change in writing—send the letter over to the employee and provide a copy of their updated contract. If not, employees can claim breach of contract and/or constructive dismissal as they were being treated unfairly.

Do you pay employees on temporary redundancy?

If one of these situations applies to you and the employee you want to lay off, you’re legally allowed to cut their hours and pay.

You don’t pay laid-off employees their normal pay unless there is a contractual guarantee payment clause. This is money you will pay the employee each week while they’re laid off/on short-time working.

It is up to you whether you offer contractual guarantee payments, but the employee may qualify for the statutory guarantee payments.

Employment law entitles employees to statutory guarantee pay during lay off or short-time working. The maximum they can get is £30 a day for five days in any three-month period - so a maximum of £150. You can tell your employee they can claim Jobcentre allowance payments on the other days.

If they usually earn less than £30 a day, they’ll get their normal daily rate.

To qualify for statutory lay-off pay, the employee must:

  • Have been employed continuously for one month (includes part-time workers)
  • Show they are available for work
  • Not refused any reasonable alternative work
  • Not have been laid off because of industrial action

How long can you lay off or put on short-time working with your employees?

If someone is laid off or on short-time working for four consecutive weeks, or six weeks in a 13-week period, they can claim statutory redundancy pay if eligible.

How long lay-offs or short-time working last will depend on what you have agreed in the employee's employment contract. An example of this is:

“If it becomes a requirement for the business, full pay won’t be due during periods of lay-off. During this time we’ll pay your statutory guarantee pay. This is payable for up to five workless days in any three-month period.”

If you’re concerned about informing an employee that they’re to be laid off, you can download our laid off letter template here.

The difference between lay-offs and redundancy

While both options may benefit your workplace in the short term, there are key differences between redundancies and layoffs. These affect both employees and your own long term future.

So one option is only temporary, whereas the other is permanent.

Holiday entitlement

As this is a short-term arrangement, you must think about future benefits and entitlements of the employee you have laid off or put on short-time working. This includes the accrual of annual leave.

Employees continue to build up ('accrue') holiday in the usual way during lay-offs and short-time working.

In the instance where a layoff becomes more permanent, there will need to be payments to account for any unused leave.

Expert support on temporary redundancies with Croner

Understanding the laws around temporary redundancy and short-time employment can confuse the best of us. Establishing policies, understanding rules and legislation around the topic, it's all important information to have at hand.

Get our expert team to advise you on contractual agreements and the temporary redundancy process for you. Croner clients get access to our 24/7 HR specialists.

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About the Author

April Harrington.

An experienced Senior Employment Law Consultant, who has worked for the group for over 9 years. April specialises in discrimination legislation. April has an extensive background in training, as well as recruitment and hospitality.