As an Employer, should I consider short-time working and lay-offs?

The question presupposes that your firm is expected to struggle financially in the forthcoming months as a result of the COVID-19 virus. Can you mitigate against this prospect by imposing short-time working and lay-offs on your employees?

Both lay-offs and short-time working permit an employer to instruct employees to remain at home for the short-term if there is not enough work for them to do. This could be due to a temporary reduction in work, such as a delay in securing a project, or a crisis such as the current one.

These can only be used if there is a contractual clause in the employee’s contract of employment which provides that the employer may reduce salary, or not pay employees during lay-offs or short-time working. If there is no such provision, the employer is entitled to impose either option on its employees, but will have to pay them their contractual salary. It will not be lawful to impose it unilaterally.

Lay-offs cover periods of time from 1 day upwards, whereas short-time working is a reduction in the weekly hours. There is no maximum period for which you can lay-off or use short-time working. However, after 4 consecutive weeks of lay off or 6 weeks of short-time working in any 13 week period, an employee can request that they are made redundant. If one or both of the clauses exist, the employer may still be liable to pay employees a ‘guarantee payment’. As the maximum is £29 per day for 5 days in any 3 month period, and hence a lot lower than most employees’ normal salary, it would be advantageous to an employer to use this if available.

The practicality is that these clauses are not included in many employment contracts. It is expected that there will be a rush by employers, and especially SME employers, to incorporate these into employment contracts when the current crisis subsides, to allow them financial flexibility. That will require consultation and agreement with their employees.

If you require advice on how to do this effectively and lawfully, please contact Chris Marshall (cmarshall@meaby.co.uk) on 0207 703 5034.