Coronavirus: UK lay-off and short-time working provisions

Out-Law Guide | 25 Mar 2020 | 1:14 pm | 2 min. read

Businesses in the hospitality, travel and other sectors are having to consider how to reduce their wage bills as 'social distancing' measures in response to the coronavirus pandemic impact on business.

UK employers may be able to take advantage of contractual lay-off and short-time working provisions, but specific legal advice should be sought before seeking to make changes to employee terms and conditions.

Coronavirus job retention scheme

The UK government has announced measures designed to help employers retain staff during the pandemic even if they are forced to temporarily shut their businesses. This is a very significant development which will impact on decision-making for employers.

See our guide: Coronavirus job retention scheme: what employers should do.

Can UK employers temporarily suspend employees on zero pay?

Without a clear contractual right to suspend in these circumstances, there is no clear route to employee suspension. Imposing suspension without agreement may give rise to claims against the employer, so agreement should be sought.

Can employers temporarily suspend employees on reduced pay?

Without a contractual right to do so, asking employees to stay at home for a temporary period on reduced pay would be a proposed contractual change, and a contract change process would be required for this to be effective. It may also trigger lay-off and short-time working provisions - see below for more on these.

Agreement from employees should be sought to deal with the current extraordinary circumstances in order to minimise the risk of legal claims. Employers in this situation should aim to be transparent with employees about the reason for the temporary suspension as well as what potential alternatives might look like, including perhaps having to consider redundancies. For example, certain airlines are currently seeking to agree periods of unpaid leave with employees, with reduced payments smoothed over a number of months.

Employers should aim to be transparent with employees about the reason for the temporary suspension as well as what potential alternatives might look like, including perhaps having to consider redundancies.

Employee entitlement to sick pay should be factored in if you are considering temporary suspension on zero or reduced pay. For more on employee entitlement to sick pay, see our Out-Law guide to coronavirus UK HR and employment implications.

What is lay-off? Is it different to suspension?

Lay-off is when an employer takes an employee off work and off pay for at least one working day. It is used as a response to lack of work, and as an alternative to making redundancies.

There is a statutory scheme for lay-off and short-time working, but a lay-off clause in the employment contract is required in order to implement this.

What is short-time working?

Short-time working is similar to lay-off, but rather than providing no work, the employer provides some, reduced, work. Less than half a normal week's work and pay will trigger the statutory short-time working protections for employees, subject to eligibility requirements.

Are employees entitled to any money if put on lay-off or short-time working?

A statutory 'guarantee payment' is payable to employees, subject to certain requirements. The maximum payment is £29 per day for up to five 'workless' days in any three-month period, so a total maximum of £145. Part-time payments are calculated pro rata.

An employer could choose to pay more.

Can lay-off trigger redundancy?

Yes, there are mechanisms within the lay-off scheme through which redundancy is triggered. If the lay-off lasts for four weeks in a row, or six weeks in a 13-week period, employees can opt for redundancy. In those cases a statutory redundancy payment would be triggered.

Can an employer introduce a lay-off or short-time working provision if they don't already have one in employment contracts?

Again, this would be a change to contractual terms and conditions and a contractual change process would be required. Legal advice should be obtained.

What if we have to consider redundancies?

We have produced short guides to some of the main issues to consider in a redundancy process and employee entitlements on redundancy.

We would recommend that you take legal advice, as consultation and a fair process is required along with additional information requirements for a large scale process.