Short-time working, lay off and reduction in hours
When is short-time working or lay off used?
In the event of a shortage of work, for whatever reason, giving rise to a diminished requirement for the particular kind of work employees are employed to carry out, an employer may find it necessary to introduce an arrangement to reduce hours of work without entitlement to normal pay. Lay off, short-time working or reducing hours, can be used in the first instance if it is expected that the reduction in work is only temporary, examples of this could be bad weather conditions, flooding of the building, waiting for confirmation of a tender for work, or even moving premises.
Additionally, it may be prudent to use lay off or short-time options as an alternative to making redundancies as there can be cost savings for the employer in terms of notice periods.
What is short-time working and lay off?
A common misconception is that lay off is redundancy, this is not the case: redundancy is when the employment is actually terminated, however if you lay an employee off, they remain on your books until either work is available again or they resign. There are different options available to you during temporary periods of reduced work, these are:
• Short-time working - this is when your employees would be required to work less than half their normal working hours.
• Lay off - this is where there is a workless week.
• Reduction in hours working - this is where employees work reduced hours but more than half their normal working hours. This may be referred to as a temporary suspension from work.
Can any employee be put on short-time working and lay off?
You should only consider the above if you have a contractual right to do so and if you have our handbook in place this is hopefully included within your terms, unless you specifically requested to not include it. However, it is best to check beforehand (in the Alcumus tailored handbook you should find it located towards the back of the handbook under General Terms sub heading ‘Short time working and Lay off’). If it is not in your employee handbook, you may have included something specifically within an employee’s contract of employment.
Provided that you do have the contractual right to enforce any such reduction in hours, you do not have to go through a selection process, as you do with redundancy, to determine who should be laid off or put on short time or temporary suspension from work. However, you must be able to demonstrate that you have not discriminated against anyone in your selection, i.e. if you can share it around the whole company, work on a rota basis or justify why it affected one area of work more than others. If you are unsure please speak with your Alcumus HR Consultant for guidance.
If you do not have the contractual right to do this, you may not be legally safe to enforce this action, meaning if you did you could result in an employment tribunal claim for breach of contract. However, the risks may be worth taking and commercially be the best way to approach things (speak with your Alcumus HR Consultancy team to discuss this and ascertain the risks). The best solution would be to seek agreement from the employees as opposed to enforcing action, you may find that employees are prepared to accept the reduction in hours as opposed to facing a redundancy situation.
Again, provided that you do have the contractual right to enforce any of the above options, you do not have to go through a selection process, as you do with redundancy, to determine who should be laid off or put on short time. However, you must be able to demonstrate that you have not discriminated against anyone in your selection, i.e. if you can share it around the whole company, work on a rota basis or justify why it affected one area of work more than others. If you are unsure please speak with your Alcumus HR Consultancy team for guidance.
What procedures do I have to follow?
Provided that you have the contractual right as detailed above, you should have a meeting with your employees, either individually or as a group depending upon the circumstances, to explain to them what you are doing and why and then confirm the content of your discussions in writing clarifying what has happened. If you can give the employee notice of the reduction it would be best practice to do so, however it is recognised that often unforeseen circumstances mean that you cannot give any notice of the requirement to reduce employees’ hours.
If you recognise a Trade Union you will of course need to consult with appropriate representatives, you may also need to take into consideration any collective or recognition agreements or any terms agreed with recognised trade bodies, such as JIB, CITB. Please seek confirmation from your Alcumus HR Consultant should this be the case.
As soon as the employee is told that they are on short-time working or are being laid off or put on a temporary suspension from work, they should contact the benefits office to establish if they have any entitlements to benefits from the State. This is one of the reasons you should provide your affected employees with a letter of confirmation of the situation so they can produce this at the benefits office. Template letters are available via our online system or via your Alcumus HR Consultancy team.
Can the reduction in hours be for an indefinite period?
Potentially it could be for an indefinite period, especially if an employee never challenges this. However, in most short-time working or lay off situations the employees cannot afford for this to be indefinite and are therefore subsequently entitled to seek being made redundant where the employee has been:
• laid off or kept on short time, (i.e. is getting less than half a week’s pay for each week) for 4 or more consecutive weeks; OR
• laid off or kept on short time for a series of any 6 weeks within a consecutive 13-week period.
If either of the above is applicable, an employee can seek to claim redundancy but only if they give notice in writing to the employer of their intention to claim a redundancy payment and subsequently resign. This must be done within 4 weeks of the last day of lay off or short-time working.
This is where the cost saving can be beneficial to the employer as the employee is in effect resigning and as such is only entitled to payment for notice that they are expected to give to terminate their employment (usually one week but check the contract of employment). If you were selecting an employee for redundancy through the normal redundancy process you would be ‘terminating their employment’ as opposed to them ‘resigning’ and you would then be obliged to pay notice based on one week for every complete year of service up to a maximum of 12 weeks.
If an employee has their hours reduced through a temporary suspension from work there is no statutory entitlement to make a claim for redundancy.
Do I have to accept the employees request for redundancy?
You may be able to counter the redundancy request provided that you can show a reasonable expectation that, within 4 weeks of the serving of the notice by the employee, full-time working will resume and continue for at least 13 weeks. You must give notice of this to the employee, in writing, within 7 days of the employee’s notice being served.
In some of the above situations you may be required to pay in accordance with the current Statutory Guarantee Pay (SGP) entitlements and within the provisions of current employment law if you have more than one month’s service. This rate is set by the Government and changes annually. Speak with your Alcumus HR Consultancy team for clarification on whether SGP is applicable.