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Could Short-time Working and Lay off Help Your Business

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In these uncertain times with inflation still rising and the cost of living continuing to make an impact, we understand the need for business owners to ensure their business is protected against fluctuations in workload or reductions in demand for products or services.

Short-time working and layoff may be options businesses can use in these situations.

Short-time working is when an employer reduces workers’ hours, whereas lay-offs are when there is no work at all and employees can temporarily not attend to work.

What is Short-Time Working?

Short-time working ensures that employees retain their jobs but work fewer hours than usual during a period of lower demand. It is typically used by businesses to help cope with short-term fluctuations in work demand. 

By law, employers can invoke short-time working if it’s:

•    Included in the employee’s employment contract
•    An agreement between your workplace and a trade union (Collective Agreement)
•    Agreed by the employer and employee to change the terms of the employment contract

Without a specific agreement or contractual right, any short time working or lay-off is with full pay.

Benefits for Employers:

Cost savings: It allows employers to reduce their employee costs while retaining their workforce, helping to manage cash flow during times of temporarily reduced demand.

Retention of skills and experience: Short-time working helps employers retain their skilled employees, ensuring that they are available when business picks up again.

Flexibility: It provides employers with flexibility to manage their workforce and adjust to changes in demand or business circumstances.

Potential Risks for Employers:

Reduced productivity: Short-time working may lead to reduced productivity as employees work fewer hours and have less time to complete tasks.

Impact on morale: Short-time working can have a negative impact on employee morale, as employees may feel frustrated or worried about their financial situation due to reduced pay.

Legal challenges: Employers may face legal challenges if they do not follow due process and notification procedures or if they do not provide employees with their statutory entitlements during the period of short-time working.

Redundancy: If employee’s pay falls below half for 4 consecutive weeks or 6 weeks in a 13 week period, the employees can submit a claim for redundancy

What is Lay-off?

Lay-off is when the company does not have enough work for its employees to maintain their normal working week.  In these situations, a day when the employee is not required to attend work is considered a lay-off day.

Employers MUST have the contractual right to lay their employees off, or it must be agreed, upon or be the “industry norm”.

For example, in the case of the motor/vehicle manufacturing industry, it is widely accepted that this industry has periods of lay-off due to downturns in sales.  It would be acceptable for a motor manufacturer to lay employees off or place them on short time working, even if their contracts do not specifically provide for this.

Guaranteed lay-off pay is currently maximum £31 per day or normal pay if earnings are less than £31 per day.  This sum is payable for 5 days in a rolling 13-week period and is pro rata for part-time employees. (Upto a maximum, £155 in 13 weeks)

Benefits of Lay-off for Employers:

Cost savings: Employers may save money on employee costs by temporarily laying off employees.

Flexibility: Layoffs provide employers with flexibility to manage their workforce, allowing them to adjust to changes in demand or business circumstances.

Reduced liability: In some cases, laying off employees can reduce an employer’s liability for redundancy pay, notice pay, and other entitlements.

Risks of Lay-off for Employers:

Damage to morale: Layoffs can lead to decreased morale and loyalty among remaining employees, who may feel insecure about their own job security.

Loss of skills and experience: Laying off employees can lead to a loss of valuable skills and experience within the organization, making it more difficult to ramp up when business picks up again.

Legal challenges: Employers may face legal challenges if they do not follow due process and notification procedures or if they discriminate against certain employees when selecting who to lay off.

Redundancy: If an employee’s pay falls below half for 4 consecutive weeks or 6 weeks in a 13-week period, the employee can submit a claim for redundancy.

Although both short time working and lay off can offer an alternative to redundancies (should employers be looking at reducing their workforce) it is important to note that not every business will qualify for this option. 

To explore your options call our advisors today on 01455 444222.

Angela Clay

A qualified employment law solicitor and our managing director, Angela has unparalleled legal expertise and decades of experience and knowledge to draw from. She’s a passionate speaker and writer that loves to keep employers updated with upcoming changes to legislation, and is a regular guest speaker on BBC Leicester Radio.