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Lay-off and Short-time Working

April 2009

Considering the current economic climate and the ever increasing number of redundancies affecting every sector, the matter of lay-off and short-time working has never before been such a hot topic.

In circumstances where there is a temporary reduction in work, employers generally before resorting to compulsory redundancies will try to mitigate the situation by taking alternative actions to redundancy. For example, alternatives to redundancy include:
• Suspending or restricting recruitment;
• Reduction or removal of overtime;
• Temporary lay-off or short-time working.


Lay-off occurs where the employer does not have enough work and therefore asks employees to stay at home.

Where an employee is off work for at least one complete working day, then this is a lay-off.

Generally, when employers do not have enough work, they have the right to tell employees not to turn up for work but they are still obliged to pay the employees their normal full pay unless:
• It is part of the contract of employment that the employer can lay-off employees with reduced or no pay; or
• There is a variation to the employment contract where the employer and the employee agree to change the contract to allow unpaid or reduced pay lay-off; or
• The unpaid or reduced pay lay-off is agreed between the employer and the trade union and it is incorporated into the employee’s contract of employment; or
• There is a national agreement for the industry that covers unpaid or reduced pay lay-off and it is incorporated into the employee’s contract of employment; or
• The unpaid or reduced pay lay-off is an established practice and there is clear evidence of that.

It is crucial to note that if the contract of employment does not provide for lay-off and there is no other express agreement to that effect, then the lay-off amounts to a breach of contract and the laid-off employee is entitled to resign and claim constructive dismissal.

Where the contract of employment provides for unpaid lay-off, the laid-off employees, if they qualify, will have the right to Statutory Guarantee Pay.

If the employment contract does not provide for unpaid lay-off then the employees will have the right to the larger of:
• what the contract provides for, which could be full pay or reduced pay; or
• if they qualify, Statutory Guarantee Pay.

Employees have the right to Statutory Guarantee Pay if:
• They have been employed continuously for at least one month; and
• They are available for work; and
• They do not refuse alternative work.

Statutory Guarantee payments are made for a maximum of five workless days in any three month period.

Guarantee payment is worked out by multiplying the number of normal working hours for the day in question by the average hourly rate. There is a limit of £21.50 per day on the guarantee payment rate, giving a maximum guarantee payment of £107.50 for five workless days.

It should be noted that Statutory Guarantee payments are payable only for complete days without work and not for any day where an employee works for part of the day.

Please note that only employees, whether full-time or part-time, can be laid-off. Temps cannot be laid-off since they have no right to paid work.

The duration of a lay-off depends on the terms specified in the contract of employment. However, generally, there is no upper limit for how long an employee can be laid-off or put on short-time working. Employees who are laid-off for a certain period of time have the right to claim redundancy pay (see below).

Short-time working

Short-time working occurs where workers’ hours are cut.

As in the case of a lay-off, the employer must have an express or implied power in order to reduce the amount of pay. Otherwise, the short-time working amounts to constructive dismissal.

Lay-off, Short-time working & Redundancy

If an employee is either laid-off or put on short-time working for four consecutive weeks, or six non-consecutive weeks within a period of 13 weeks then the employee can give the employer written notice that he intends to claim a redundancy payment.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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