With the UK facing a recession and announcements of job losses increasing on a daily basis, many businesses are considering alternatives to redundancy, such as lay-off and short time working.
Traditionally the domain of manufacturing businesses, other sectors are now considering utilising these options. The legislation in this area, however, is complex. Lisa Norman unpicks the detail and sets out some practical considerations.
In this issue:
What is ‘lay off’?
‘Lay off’ has a specific legal meaning and is not the same thing as redundancy. An employee is laid off when he is not provided with work (and therefore receives no pay) and the situation is expected to be temporary.
Back to top
What is ‘short time working’?
Short time working occurs when an employer reduces the number of working hours and / or days and the employee’s pay is reduced accordingly. Where the employee’s remuneration is reduced to less than half a week’s pay, statutory provisions may bite (see below).
Either lay off or short time working can result in the employee claiming a redundancy payment (see below).
Are you entitled to lay off or impose short time working?
An employer can only lay off employees, or impose short time working, if it has an express (or, in very limited circumstances, implied) contractual right to do so. This may be contained within individual contracts, but more commonly is agreed through collective bargaining and incorporated into contracts of employment.
In the absence of an express right to be able to lay off, the lay off will be in breach of contract and the employee will be entitled to resign and claim constructive dismissal. A dismissal in such circumstances is likely to be unfair. An employee could, alternatively,
- claim a statutory guarantee payment;
- sue for breach of contract; or
- bring an Employment Tribunal claim for unlawful deduction of wages.
The latter is the most likely and could result in the whole point of the lay off/period of short time working being defeated in that the employer will be required to pay those employees who did not attend work, or worked reduced hours.
back to the top
How long can the lay off or short time last?
In theory, there is no time limit on a period of lay off or short time working. However, an employee can claim to have been dismissed by reason of redundancy – and claim a redundancy payment – if they have been laid off or kept on short time (where they are receiving less than half a week’s pay) for,
- four consecutive weeks; or
- six or more non-consecutive weeks in any 13 week period.
The employee may send a written notice to his employer of his intention to claim a redundancy payment, and must terminate his employment by giving notice: not necessarily an attractive option in the current climate.
It is possible for employers to issue a counter-notice to employees claiming a redundancy payment, and this triggers a complex regime.
What should you pay employees who are laid off / on short time working?
Employees with more than one month’s service who are laid off without pay are likely to be entitled to receive a statutory guarantee payment from their employer. The calculation for this is complex and is subject to a maximum: currently £20.40 per day and set to rise to £21.50 with effect from 1 February 2009.
The employee can lose the right to the payment if they refuse to undertake suitable alternative work during the lay off, or do not comply with requirements imposed by the employer to ensure that they remain available for work. The entitlement is payable for a maximum of five days in any rolling three month period.
back to the top
Practical issues
Aside from the complexities of the legal provisions, there are also practical matters to consider.
Should the employer lay-off employees or put them on short time working?
This is likely to depend upon the nature of the business, running costs of the operation and business need. It may be more cost effective for an organisation to lay off employees as the associated operational costs are reduced. However, that can mean that the business is less flexible or able to respond to customer needs.
Who should be laid off or put on short time?
Where an entire business is affected this is straightforward. More often than not, however, there are certain departments in which work has reduced. Any selection should be carried out carefully and transparently so as to avoid allegations of discrimination or unfair treatment.
Consultation?
Often the collective agreement which allows for lay off or short time will set out how the working arrangements are to be implemented. Even in the absence of such provisions an employer should decide how the decision will be communicated to employees and consider the cost impact of the decision in terms of morale. This is a sensitive area – employees’ pay will be reduced; but employees may be more amenable to proposals if they understand the reasons for them and the potential alternatives, particularly if those could include redundancies.
For further information on lay off, short time working and other employee cost saving measures, you may wish to attend one of our free workshops on ‘Law in a Cold Climate: Options Short of Redundancy’, being held at our London, Bristol and Birmingham offices in February and March. Please click here for further details.
back to the top