Introduction to this document

Lay-off and short time working clause

If your business is subject to cyclical demand, consider inserting a lay-off and short time working clause enabling you to lay off an employee for periods where you won’t have to give full pay.

No general right to lay off

You have no right to lay off employees without pay in the absence of an express term in the contract. Thus, where you do so, you will still be obliged to pay them their full pay, even if trading conditions are poor and even if you don’t have any work at all for the employees to do. If you fail to pay full pay in these circumstances your employees will have a claim for unauthorised deductions from wages. They may also resign and claim unfair constructive dismissal if they have sufficient continuity of employment. An employee can generally claim constructive dismissal if they have been employed for two years or more. If your business is in an industry which may require lay offs or short time working to be imposed from time to time, always include an express clause to this effect in staff contracts. That way, you protect yourself. Our Lay-off and Short Time Working Clause provides that full pay will not be due during these periods. Rather, you will simply be obliged to pay the statutory minimum guaranteed pay, which is only payable for up to five workless days in any three-month period and is subject to a low daily limit.

Right to a redundancy payment

Be aware that if an employee has been laid off or kept on short time for four or more consecutive weeks or for six weeks in any 13-week period, they may be entitled to claim a redundancy payment from you if certain conditions are satisfied. Bear this in mind when reviewing the length of any lay off or short time working period.