Laying-off staff – negotiating the legal minefield

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With many firms experiencing a drastic decline in business as a result of COVID-19, many may try to soften the impact by letting employees work from home or asking them to take annual leave.

But these measures are not always possible, and badly affected businesses may need to take more radical steps by reducing working hours – or staff numbers.

Employment lawyer Hiren Gandhi points out some of the steps you need to take to stay compliant, particularly when deciding between short-time working and lay-offs.

Firstly, it’s crucial that you understand the difference between both. 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.

Short-time working and lay-offs – it’s vital to know the difference between the two

These are both temporary cost-cutting measures you may use when there is not enough work to go around. Short-time working and lay-offs can help you avoid dismissals or permanent redundancies, whilst reducing the burden on your business.

You can only lay off staff or put them 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 into the contract.

If there is no clause permitting either, using these measures will be a breach of contract, and the employee may resign and claim constructive dismissal.

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, you should usually pay staff full wages during any period in which staff are not working, in order to avoid breaching the contract. However this may be unaffordable for many employers.

You should check the employment contract, which may state by how much the employee’s pay can be reduced. 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.

You may alternatively be required to pay a statutory guarantee payment for up to five ‘workless days’ in any three-month period where an employee is not provided with work.

Any lay-off or short-time working clause in the contract will state how long you can implement these measures for. After a certain length of time, the measures can be considered a full redundancy.

If the Coronavirus situation changes quickly, you may incur costs when bringing back staff

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 four consecutive weeks or six weeks over a 13 week period. Eligible employees can then resign and claim statutory redundancy pay.

You 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, you may incur costs when bringing back staff after a temporary lay-off.

You 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 – and legal advice.

Hiren Gandhi is partner at Blaser Mills Law