Lay Off and Short Time Working

The so called “credit crunch” is having a very real effect on employment with more people being laid off or put on short-time working and this is the focus for this article.

If the employer does not have enough business to enable them to employ all or part of their work force for a temporary period, they might lay them off. An employee will be laid off for a particular week if they get no pay of any kind for that week because their employer does not provide the employee with the kind of work the employee is employed to do.  The employer may not actually tell the employee that they are being laid off but may say, for example, that the employee must take some unpaid holiday as there is not enough work for them to do. This is still a lay off, even if the employer does not call it that. 

If the employer does not have enough business to enable them to employ all or part of their work force for their normal working hours, they might put them on short time working. An employee will be on short time working when they work shorter hours than usual and, as a result, their pay for any week is less than half a normal week's pay.

Most contracts do not allow an employer to lay off employees or put them on short time working.  Some contracts do not mention lay off and short time working, but refer to industry wide agreements negotiated by employers and trade unions which allow for lay offs and short time working. If an employee's contract does not mention lay offs and short time working and there is no industry wide agreement, it is possible that lay offs and short time working have been agreed by previous custom and practice.

If the contract does allow for lay off and/or short time working, an employee who has been laid off or put on short time may be entitled to:

• receive a guarantee payment - a guarantee payment is a payment made to an employee to keep their services during a period of lay off or short time working;
• claim a redundancy payment – if they have worked for their employer for two years where the lay off or short time working lasts for 4 consecutive weeks or for any 6 weeks in a 13 week period.

If the contract does not allow for lay off and/or short time working, then an employee who has been given no pay of any kind for a particular week because their employer has not provided them with work, or who has been put on short time may be entitled to:

• choose to resign and claim constructive unfair dismissal due to breach of employment contract provided they have worked for their employer for one year; or,
• claim that there has been an unlawful deduction of wages.  The employee must first raise a grievance with their employer before making a claim to an industrial tribunal.

If however, an employee agrees to a lay off or short-time working then this could constitute a change of contract and they are entitled to:

• receive a statutory guarantee payment - statutory guarantee payments can be made for a maximum of five days in any three month period (currently £20.40 per day); or,
• claim a redundancy payment – if they have worked for their employer for two years where the lay off or short time working lasts for 4 consecutive weeks or for any 6 weeks in a 13 week period.

This is a complex area of employment, particularly with regards to claiming redundancy, and therefore advice should always be sought.  More information is available from your local CAB or from the Labour Relations Agency on 028 9032 1442.