Even the best run organisation may experience a temporary downturn in work or reduction in demand. But can you lay people off or put them on to a shorter working week until such time as business picks up?
What is lay-off? This is where, on a temporary basis, employees are not provided with work.
When can you lay off employees? As a rule, you cannot simply tell people not to turn up for work, but neither can you not pay them because work is not available. However, you are permitted to lay off employees if there is an express clause in their contract of employment giving you this right. You may also be able to lay off if you can show by custom and practice that it has been done in the past. This is called an “implied term”.
But where there is no express or implied right to lay off, it is possible to reach agreement with employees, giving you this right. This may be appropriate where the only alternative is redundancy.
Do you have to pay employees during a period of lay-off? You do not have to pay if there is a specific term in their contract. But employees may be entitled to a statutory guarantee payment of up to 5 days in any 3 month period. Rates can be found at www.berr.gov.uk. Employees may be able to claim Job-seekers Allowance for days when a guarantee payment is not payable and should contact their local Job Centre about eligibility.
Short-time working is when employees are laid off for a number of hours each day or days each week. There must be an express or implied term for you to be able to reduce their pay. Where you reduce pay without this right, an employee may bring a claim for constructive dismissal against you.