Many UK businesses are experiencing a drastic decline in business as a result of COVID-19. Customers socially distancing may lead to a fall in sales; employees self-isolating may slow production.
Businesses may try to soften the impact by letting employees work from home, or requiring them to take annual leave. However, these measures are not always possible, and badly-affected businesses may need to make more radical steps by reducing working hours, or staff numbers.
- ‘Short-time working’ – is when employees are provided with less work and less pay for a short period.
- ‘Lay-offs’ – are when employees are not provided with any work or pay for a short period but are kept on as employees.
These are both temporary cost-cutting measures employers may use when there is not enough work to go around. Short-time working and lay-offs help to avoid dismissals or permanent redundancies, whilst reducing the burden on the business.
Can I use these with my employees?
Employers can only lay off staff, or put staff on short-time working with reduced pay, if there is a term in the employment contract (or collective agreement) permitting this. In industries where these measures are common practice, the right to use them may be implied, even if it is not written out in the contract.
If there is no clause permitting lay-offs or short-time working, using these measures will be a breach of contract, and the employee will be entitled to resign and claim constructive dismissal.
How much should I pay my staff during this period?
Any lay-off clause in the contract should state that no pay is due during the lay-off period. If there is no lay-off clause, employers should usually pay staff full wages during any period in which staff are not working, in order to avoid breaching the contract. This may be unaffordable to many employers.
Employers should check the employment contract, which may state how much the employee’s pay can be reduced by. Short-time working occurs when an employee’s weekly remuneration is reduced to less than half a week’s pay, because of a shortage of work. If the contract guarantees a ‘fall-back’ rate of pay which exceeds half a week’s pay, the employee will not be on short-time.
Employers may alternatively be required to pay a statutory guarantee payment, for up to 5 ‘workless days’ in any 3-month period, where an employee is not provided with work by their employer.
How long can I keep these measures in place?
Any lay-off or short-time working clause in the contract will state for how long an employer can implement these measures.
After a certain length of time however, these measures can be considered a full redundancy. This will be the case if an employee is laid off or kept on short-time working (or a mixture of both) for at least:
- 4 consecutive weeks; or
- 6 weeks over a 13 week period.
Eligible employees can then resign and claim statutory redundancy pay from the employer.
Employers should also be aware that once laid off, staff may not be available to immediately return to work when needed. If the coronavirus situation in the UK changes quickly, employers may incur costs when bringing back staff after a temporary lay-off.
Employers will also need to report to the Home Office within 10 working days of any decision to lay off or require short-time working, if any affected employee is a visa holder. The decision may also affect that employee’s visa status.
These measures may be essential to keep a business ticking over whilst retaining jobs. However, this can be a delicate area of law which requires careful handling.
How Blaser Mills Law can help your business
We have been and continue to advise businesses on their employment and HR strategy and planning. If you would like a video call with one of our employment lawyers please contact James Simpson, Head of Employment, on 01494 478689 or at email@example.com