As businesses begin to enter unknown territories and attempt to adjust accordingly due to the impact of Covid-19, there has been an increase in enquiries in businesses options to lay off employees or to put them on short-time working. We’ve put together a guide to help you understand your options during this challenging period.
What is the legal definition for Lay-Offs and Short-Time Working?
To lay-off an employee, the employer would not provide any work or pay for a period of time whilst still maintaining them as an employee.
Short-time working allows the employer to reduce the employees work and pay for a period of time whilst still maintaining them as an employee.
This is a temporary solution for when businesses experience a strong and unexpected downturn.
Do we need a contractual right to lay off or put employees on short-time working?
Yes – an employer may enforce lay-offs or short-time working if they have an express contractual right.
What if we don’t have a contractual right?
Without the contractual right to do so, you will be in breach of contract if you decide to lay off or deduct your employees hours to short-time working. This could also lead to a number of claims; such as, unlawful deductions from wages, constructive dismissal and/ or statutory redundancy payments.
If this is an option you were looking to explore, you would need to seek your employees’ permission before doing so. They must understand the circumstances in which you are seeking the variations and the implications of them not being agreed before being given the choice to freely accept or decline.
Employers are expected to meet strict tests and there are limited circumstances in which you are given the right to lay off or put your employees on short-time working. Please get in touch for further advice.
If we do have a contractual right, how do we go about applying it?
Check the wording of your contractual right to see if there’s a notice provision attached to it. If you have a notice provision but the current threat of Covid-19 to businesses makes you unable to see out that notice, an employee could have a claim for breach of contract for the full pay they would’ve received during that time. This will need to be something that you will need to discuss with your employees.
Is it possible to lay-off or implement short-time working for some staff, but not all?
Yes, this is possible. Although If you’re looking to lay off or implement short-time working for some employees within a particular role, we would highly recommend using a short selection matrix. This is similar to the approach you would take for a redundancy selection exercise. The experience of the employee, willingness to take on new roles, depth of skills and attitude can all be used as part of the criteria and will need to be scored consistently by two managers.
When might an employee become entitled to a statutory redundancy payment in a layoff or short-time working scenario?
There are certain requirements that need to be met in order to claim Statutory Redundancy Payment:
- Have at least 2 years continuous service
- Spent the necessary length of time on lay off or short-time working:
- 4 or more weeks in a row
- 6 or more weeks in a 13 week period, where no more than 3 are in a row
How do we calculate a statutory redundancy payment?
The SRP is based on a number of factors; their age, length of employment and are counted back from the date of dismissal. However further considerations need to be made for employees who have been laid off or placed on short-time working.
Your week’s pay is calculated as at the ‘calculation date’. This would be the date of notice the employer would have to give to comply with statutory minimum notice requirements.
A ‘weeks pay’ is calculated in reference to an employee’s normal earnings. This doesn’t include the period of short-term working. It is capped at £525 per week (From the 6th April 2020, this will be rising to £538 per week).
Are employees entitled to any other payments?
Employees may be eligible for Statutory Guarantee Pay (SGP) for up to 5 workless days during a three-month period. This is subject to certain conditions and may be applied if they have not been provided by work due to the following:
There is a significant reduction within the employers business for the work the employee is employed to do.
There are circumstances which affect the business to this line of work.
The SGP is limited to £29 per day (rising to £30 from 6th April 2020), although it may be lower due to the calculation required.
An employee who hasn’t been laid off or on short-time working may still be entitled to SGP if a temporary contract is agreed without relying on a contractual clause.