First published on Friday, Feb 04, 2022

Last updated on Friday, Jun 07, 2024

As an employer, you may have to cut costs due to a decrease in demand for paid work. One way of doing so is by laying-off some of your employees.

However, you must ensure you're laying employees off for the correct reasons and acting within the law. Failure to do so can lead to claims being raised against you, which could lead to heavy damages to pay.

In this guide, we'll discuss what a lay-off is, when you'd take this option, and your legal obligations as an employer.

What is a Lay-Off?

Laying off an employee means forcing them to stay home for a temporary basis. The main aim of lay-offs is to bring them back in the future.

They are typically carried out when there isn't enough work available for your employees. Before taking this option you must consider others. For example:

When Can You Lay Off an Employee?

There are times when you can legally lay-off employees or put them on short-time working. Such as:

  • If it is included in their employment contract.
  • If it is common practice in your business, however clear evidence is required.
  • If there is an agreement between your company and a trade union.
  • If there has been a change in the employment contract allowing lay-offs. If this is the case, you must confirm all changes in writing.

As an employer, another option you can take is putting an employee on short-time working. But, you need to know the differences between the two.

How is Short-Time Working Different from a Lay-Off?

Short-time working is different to a lay-off because instead of not working at all, an employee works reduced hours.

The main reason for laying off staff or putting them on short-time working is to reduce costs and avoid redundancies. However, there are also other reasons why you would take this option.

How Long Can You Lay Employees Off For?

Legally, there's no time limits to how long an employee can be laid off or put on short-time working.

How long you can lay them off for depends on what has been agreed as part of the employee's employment contract.

Do Employees Get Paid When During Lay-Offs?

Employees who have been laid-off or put on short-time working should receive full pay. However, there is a reason why you don't have to provide your employees with this amount:

  1. If it's agreed otherwise in their employment contract.

Most employees are entitled to statutory guarantee pay when laid off. So, as an employer you must understand your obligations.

What is Statutory Guarantee Pay?

Statutory guarantee pay is the legal amount you must provide any employee during lay-offs or on short-time working. They should receive this pay for the days they don't do any work for you.

How Much is Statutory Guarantee Pay?

If eligible for this form of pay, your employees must receive a maximum of £155 during lay-offs. This equates to £31 a day for five days in any three-month period.

For employees who typically earn less than £31 a day, they must receive their usual daily rate. Part-time workers get paid in proportion to the days they work.

You may choose to provide your employees with a better guarantee pay scheme. If this is the case, details should be included within their employment contract.

Are All Employees Entitled to Pay Whilst They Are Laid-Off?

Not all employees are eligible to receive guarantee pay if they have been laid off. To be eligible, the following criteria must be met:

  • Be classed legally as an employee.
  • Must have been employed continuously for at least one month.
  • Must not refuse any reasonable alternative work.
  • Must be available to work.
  • Must not have been laid off due to industrial or strike action.

Can Employees Claim Redundancy Pay During a Lay-Off?

Employees are well within their rights to claim redundancy pay if the lay-off or short-time working lasts for the following:

  1. Four or more weeks in a row.
  2. Six or more weeks in a 13-week period (where no more than three weeks are in a row).

However, they must provide you with a written notice in advance of them wanting to make a claim. You don't have to provide redundancy pay if you're planning to bring the workforce back within four weeks. And if you can guarantee continuous work for 13 weeks.

Can Employees Claim Benefits Whilst Laid-Off?

Some employees may be entitled to claim benefits if they have been laid-off. You should make them aware they may be able to claim for Universal Credit or Jobseeker's allowance.

How to Act fairly During Lay-Offs

As an employer, you must act fairly when laying someone off or putting them on short-time working. This includes avoiding discrimination.

An employee should never be laid-off or put on short-time working due to a certain protected characteristic they hold. You should be fair at all time, otherwise you could face tribunal claims.

What Happens if you do not Act Fairly During Lay-Offs?

Failure to act fairly during the lay-off process is against employment law. If an employee feels victim of discrimination or unfair treatment they may raise a claim against you to an employment tribunal.

Getting it wrong could lead to reputational damage and heavy compensation to pay.

Get Advice on Lay-Offs with BrightHR

As an employer, you may be left with no choice but to lay-off some employees or put them on short-time working. This could either be to cut costs or to avoid redundancies.

However, you must act fairly and on the right side of employment law during this time. So ensure you familiarise yourself with the process. Failure to get it right could lead to a claim being raised against you.

BrightHR can help you manage who to lay-off. If you need any assistance on lay-offs, don’t hesitate to get in touch with one of our experts.

Book in a free demo today to see how easy it is. Give us a call on 0800 783 2806

Alan Price

CEO, BrightHR and Group Chief Operating Officer

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