During the current Covid-19 situation, many employers will be looking to designate employees as “Furloughed Workers”, sending them home and claiming 80% of their pay from the Government Fund. This should be done with employee agreement as this is a contractual change, however it is likely that the majority of employees would agree as this would ensure some measure of financial certainty. However, if any employees do not agree to be furloughed for any reason, employers may have to consider lay-offs or short-time working and we set out below guidance on that particular area of law:
Lay-offs and Short-time Working
Lay-off and short-time working are both tools designed to help employers cope with a temporary shortage of work whilst retaining employees.
What Is a Lay-off?
- Laying off employees means that the employer provides employees with no work (and no pay) for a period while retaining them as employees.
What Is Short-time Working?
- Short-time working means providing employees with less work and less pay for a period while retaining them as employees.
- Short-time work is defined as a diminution in the work which the employee does leading to the employees pay being less than 50% of a normal week’s pay.
Employee Rights in Connection with Lay-offs and Short-time Working
- In order to be able to lay off employees or put them on short time working, an employer must have a contractual right (express or implied) to do so.
- It will constitute a breach of contract for employers to do so without such a right, which could result in employees resigning and claiming constructive unfair dismissal.
Where an employer needs to deal with an unexpected downturn in its business or unforeseen circumstances but does not have a contractual right to lay employees off or put them on short-time working, the employer may wish to consult with them (including with trade unions or other representatives, where appropriate) to try to agree for staff to either be laid off without pay or to agree to a temporary reduction in working hours, as an alternative to the employer having to consider redundancies.
Guarantee Pay and Workless Days
- An employee may be entitled to a statutory guarantee payment (SGP) on up to 5 “workless days” in a three-month period.
- The current rate of SGP is £29.00 (from 1 April 2019 to 31 March 2020). This means the maximum an employee can receive at present is £145 in any three-month period.
Entitlement to a Statutory Redundancy Payment
- Subject to meeting relevant statutory conditions, an employee who is laid off or put on short-time working will be entitled to apply for a statutory redundancy payment in certain circumstances.
- The employee must have been laid off or kept on short-time working (or a combination of both) for at least four or more consecutive weeks or a total of six weeks in any period of 13 weeks.
- There is a statutory process of how the employee must serve a written notice of intention to claim SRP.
The employer’s only defence is that it reasonably expected that, within four weeks of the date of service of the employee’s notice of intention to claim, the employee would start a period of employment with it of at least 13 continuous weeks. To rely on this defence it must follow the correct counter-claim process within specified time periods.