UK businesses may have the option to take advantage of contractual lay off and short-time working provisions, but should seek advice before making any changes to employment terms and conditions.
Provisions contained in the Employment Rights Act 1996 prevent employers from laying employees off, ie suspending employees’ contracts of employment without pay rather than declaring redundancies when the amount of available work has diminished. The provisions also provide a method by which an employee who is suspended in this way can claim a guarantee payment and/or in such circumstances can assert their right to a redundancy payment.
A lay off occurs where an employee is not provided with any work by the employer in any given week with the result that the employee is not paid at all for that week.
Short-time working occurs where there is a reduction in the amount of work available for the employee and as a result he or she is paid for less than half a week’s pay.
A week for these purposes means the seven days from a Sunday to a Saturday.
What does this mean for employers?
An employer will only be entitled to lay an employee off or place him or her on short-time working if either the employee expressly agrees at the time to the lay off or short-time working, or the employee’s contract contains a clause authorising the employer to withhold or reduce pay in defined circumstances.
If the employer has no such right under the contract, but nevertheless reduces or stops an employee’s pay, the employee would be able to make a claim for unlawful deduction from wages, resign and claim constructive dismissal (subject to having at least two years' service) and possibly claim a redundancy payment.
If, however, the weeks of lay off or short-time working are wholly or mainly due to a strike or lockout, the employee will not be able to complain to an employment tribunal in respect of any proportionate reduction of pay for those weeks.
In circumstances where a lay-off is occasioned by a reduction in the type of work the employee is employed to do, the affected employees may be entitled to guarantee payments.
A guarantee payment is payable for a maximum of five days in any three-month period. Payment does not affect or prejudice an employee's contractual rights.
To be eligible for a guarantee payment, the employee must have been continuously employed for a period of not less than one month ending with the day before the day in respect of which the guarantee payment is claimed.
To be entitled to a guarantee payment in respect of a particular day, the employee must have been laid off for the whole of that day. There will be no right to a guarantee payment where employees have worked for part of the day in question. Furthermore, no payment will be due if the lay-off is caused by or connected to a trade dispute, ie a strike, lockout or other industrial action. The trade dispute need not be the sole cause of the lay-off. For example, if there is a strike at one plant of a company which causes production to be dislocated at another plant and this results in employees being laid off at that other plant, the laid off employees will have no statutory right to guarantee payments, even if they are in no way concerned or interested in the trade dispute.
An employee who is otherwise entitled to a guarantee payment will lose that right if the employer has offered to provide suitable alternative work and the employee has unreasonably refused that offer. This will be the case irrespective of whether the alternative work offered is work that the employee can be required to do under his or her contract of employment. The question of whether the work was suitable, and whether it was unreasonably refused, are questions of fact which, if challenged, would have to be determined in the circumstances of each individual case. The right will also be lost if the employee does not comply with reasonable requirements imposed by the employer with a view to ensuring that he or she remains available for work.
The maximum statutory guarantee payment for any workless day is currently £29.00 per day or £145 for a week and this will be increasing to £30 per day or £150 per week from 6th April 2020.
Eligibility for a redundancy payment when an employee is laid off or placed on short-time working
An employee will be eligible for a redundancy payment if he or she is laid off or kept on short-time working if the employee:
- Has been laid off or kept on short-time working for four or more consecutive weeks, or for a series of six or more weeks (of which not more than three were consecutive) within any 13 week period
- Gives the employer proper notice to terminate his or her contract of employment as per the terms of the contract
- Gives written notice to the employer indicating his or her intention to claim a redundancy payment in respect of lay off or short-time working. Such notice must be served within four weeks of the end of either the last of four consecutive weeks of lay off or short-time working, or the last of six non-consecutive weeks of lay off or short-time working.
The employer may, in defined circumstances resist a claim for redundancy pay by serving a written counter-notice on the employee within seven days of receipt of the employee’s notice of his or her intention to claim a redundancy payment. The circumstances in which the employer may do this are where the employer reasonably expects to be able (within four weeks of the employee’s notice) to provide the employee with full time working, ie with no further lay offs or short-time working, for a period of at least 13 weeks.
Contact the Alcumus PSM HR team for more information and/or advice on any of the above by emailing [email protected] or call us on 01484 439930.