Letter imposing a lay-off or short time working (in exercise of a specific contractual power)

If you’re looking at temporary ways of reducing employment overheads due to a work downturn but without having to resort to redundancy, implementing a lay-off or short time working may provide a solution. However, you can only impose a lay-off or short time working where you have the contractual right to do so.

Definition

Where you don’t provide work for an employee on a day when they would normally work because there is a diminution in the requirements of your business for work of the kind which the employee is employed to do, the employee is said to be “laid off”. Where the employee works for you for some of the week but is laid off for the rest of the week, that’s known as “short time working”.

Contractual provision

If an employee’s contract of employment contains an express contractual right for you to impose a lay-off or short time working on them, it is binding on the employee, subject to your exercising the clause in accordance with the implied term of mutual trust and confidence. Use our Letter Imposing a Lay-Off or Short Time Working (in Exercise of a Specific Contractual Power) to cover this scenario. The best way to deal with this situation is to have a meeting with the employee to explain your intentions verbally (and the reasons for the current state of affairs) and then use our letter to confirm the position in writing, giving the employee as much notice as you can. Our letter sets out that the position is only intended to be temporary and approximately how long it is likely to last for - you just need to fill in the details. Make sure you then keep your employees informed on an ongoing basis if things don’t improve and the lay-off or short time looks set to last longer than you first envisaged. With short time working, also ensure you set out what the new temporary work arrangement is to be.

Guarantee payments

Most employees are entitled to a statutory guarantee payment for any complete day of lay-off or short time working (known as a “workless day”), which it’s your responsibility to pay. This is limited to a maximum of five days’ payment in any three-month period. If the employee is normally contractually required to work less than five days a week, their entitlement cannot exceed the number of days they are required to work per week. The amount of guarantee pay per day is based on the employee’s normal daily rate of pay up to a statutory maximum which increases on 6 April each year. Note that if you provide some work, although not the usual amount of work, during a particular day, that day is not considered a day for which an employee is entitled to a guarantee payment. Any contractual remuneration which you pay the employee in respect of a workless day can be off-set against your liability to make a guarantee payment, so if you want to pay the employee full pay for a short period during lay-off or short time working you can do so and you won’t have to pay guarantee payments on top.

Exclusions

Employees who have worked for you for less than a month ending with the day before the workless day are not entitled to a guarantee payment. In addition, employees can forfeit their right to a payment if they unreasonably refuse an offer of suitable alternative employment for the workless days, whether or not it is work which they’re employed to perform under their contract of employment, or if they fail to comply with your reasonable requirements to be available for work.

Redundancy payments

Employees may be entitled to claim redundancy payments if they are laid off without pay, or put on short time (which, for these purposes, means where they are on less than half a week’s pay), for four consecutive weeks, or for six weeks within a block of thirteen weeks. There’s a complicated procedure to be followed which we’ve only covered briefly here. Essentially, a redundancy payment may only be claimed by an employee laid off or on short time working if they give notice in writing to you of their intention to claim a redundancy payment and their claim is submitted within four weeks of either the end of at least four consecutive weeks of lay-off or short time working or the end of at least six weeks within a thirteen-week block. The employee must then terminate their contract of employment by giving you their contractual notice period or one week’s notice, whichever is greater. You may either agree to meet the claim, or you can refuse to do so and serve a counter-notice contesting liability to make a redundancy payment, within seven days after service of the employee’s notice of intention to claim, on the ground you reasonably expect to be able to provide at least thirteen weeks’ continuous employment without further resort to lay-offs or short time working.