In these uncertain times, a number of businesses are facing difficultly. It is important to understand all your options and here we discuss lay-off, short-time working and the time limits to bear in mind to avoid compulsory redundancies.
Lay-off and Short Time Working
Where a business cannot provide work to an employee it can consider lay-off or short-time working as a temporary measure.
Lay-off: Employees are laid off where they have not been provided with any work on a temporary basis, this is usually one week at a time.
Short time working: Employees are on short-time working where they have been laid-off for a set number of days or hours per week but are still carrying out some work.
There is no process to follow when placing employees on short-time working or laying them off, employees simply need to be notified and we recommend that it is confirmed in writing.
If an employee is not available for work because of illness, they will not be treated as being laid off, even if the rest of the workforce has been laid off during that period.
Pay During Lay-Off or Short Time Working
If an employee is ready and willing to work, but the employer has no work available, they are entitled to be paid for any time spent not working unless the employer has invoked its contractual right to lay-off without pay.
Please take specific advice from us if the employee’s contract of employment does not contain the express right to lay-off without pay.
Statutory Guarantee Pay is payable for every workless day where the employer cannot provide work. The payment is £29 a day for 5 days in any 3 month period. An employee’s entitlement is subject to:
– Having been continuously employed for 1 month ending with the day before the workless day;
– A complete working day must be lost; the right is not applicable in respect of a day in which some work is provided, even if that work is outside of the usual working hours;
– Where a shift starts before midnight and ends the following day, the workless day will be taken to be the day they started the shift if it is, or would normally be, longer in duration before midnight. If not, it will be treated as falling wholly on the second day.
Any monies paid out as Statutory Guarantee Payments are 100% tax-deductible from the company’s corporation tax.
Employees are entitled to terminate their contract with notice, and it be classed as a redundancy if they are laid-off or placed on short-time working for a set period of time. The employee would then be entitled to receive statutory redundancy pay if they have 2 years of continuous service.
In this case, they are classed as laid-off if their employer does not provide them with the work they are employed to do or with full contractual remuneration for the period of the lay-off – if they are paid for the work even if they do not work it, they are not classed as having been laid-off.
An employee will be considered to be on short-time working if they are provided with less work by the employer, such that their remuneration for any week is less than half a week’s pay.
To be entitled, the employee must have been laid-off or put on short-time working (or a combination of the two) for either:
– 4 or more consecutive weeks; or
– a total of 6 weeks (of which no more than 3 are consecutive) in any period of 13 weeks.
For these purposes, a week is Sunday to Saturday, unless the employee’s pay is calculated by reference to a week ending with a different day, in which case it ends with that day.
There are specific time limits for an employee to adhere to in order to be entitled to redundancy pay, so please contact us if you receive notice.
Avoiding Compulsory Redundancy
To avoid an employee claiming redundancy, the longest period of time in which lay-off and short-time working can be stretched out at the lowest cost to a business is set out below. Hopefully, by stretching this period out to 8 weeks, businesses will have started to recover. This calculation includes two weeks being paid at 50% of the usual wage but it prevents a redundancy entitlement in 6 weeks time.
N.b: A week is classed as Sunday to Saturday unless employees are paid weekly, it is the week which they are paid for and it is presumed that the employees earn more than £250 a week, contact us if not.
- Week 1: Lay-off with Statutory Guarantee Payments of £25 a day for 5 days (counts for redundancy purposes)
- Week 2: Lay-off with no pay (counts for redundancy purposes)
- Week 3: Lay-off with no pay (counts for redundancy purposes)
- Week 4: Short time working with 50% pay – you do not have to provide the work
- Week 5: Lay-off with no pay (counts for redundancy purposes)
- Week 6: Lay-off with no pay (counts for redundancy purposes)
- Week 7: Short time working with 50% pay – you do not have to provide the work
- Week 8: Lay-off with no pay (counts for redundancy purposes) – REDUNDANCY ENTITLEMENT KICKS IN
If in 7 weeks, it appears that the business is picking up again, please speak to us about how else you can extend the period of time before a redundancy entitlement arises.
If an employee serves notice to terminate their contract and is entitled to redundancy, it will be necessary to review the duration that they were laid off or placed on short-time working for.
We, therefore, advise that each week (as defined above), you should telephone your employee at the end of the week and ask if they are still well. If they are unwell and self-isolating, that week will be classed as sick pay and will not count for the purposes of redundancy as detailed herein. If they are well enough to work but you do not have enough work, we advise that you email them the following wording:
Further to our call on [date], you confirmed that you are well enough to work. Unfortunately due to the current situation in relation to Covid-19, we do not have sufficient work.
We are hereby invoking our contractual right to lay-off or short-time working for the week commencing [date] to [date]. You will be deemed to be
a) [laid-off and are not required to attend work. You will receive a statutory guarantee payment of £25 a day for 5 days].
b) [laid-off and are not required to attend work. You will not receive any payment].
c) [placed on short-time working. We do not require you to attend the site but you will receive 50% of your normal weekly wage.]
We are keeping the situation under constant review and we will contact you again at the start of next week to make a decision as to how we proceed then.