Managing Lay-offs and Short-time Working

Redundancy can arise when a business (or part of it) is shut down completely, or, where the requirement for employees to do work of a particular kind has ceased or diminished.

Redundancy is usually final and leads to the end of an individual’s employment.

Redundancy is one of the five potentially fair reasons to dismiss an employee, however redundancy procedures must be followed by employers in addition to recognising Statutory Redundancy Pay:

• Employees who are made redundant and have at least 2 years’ continuous service, are entitled to statutory redundancy pay.
• Redundancy payments are calculated on the basis of an employees’ age, length of service and weekly pay.
• If an employee has worked for the company for a prolonged period, large sums of money may be payable in a redundancy situation.

LOST can be used as ‘temporary redundancy’ where an individual’s employment can continue when business circumstances change.

Businesses may choose to implement LOST rather than redundancy, to avoid losing otherwise valued employees during the Covid-19 pandemic.

What are Lay-offs and Short-time Working

• Lay-off – is where employees are not provided with work and are not paid as a result.
• Short-time working – is where employees are provided with less work and paid less as a result.

Whilst lay-off and short-time working are usually grouped together, they are separate matters.

Contractual clauses and LOST

In the absence of a contractual term, periods of LOST will need to be at full pay. Not paying employees in this position will breach their contract of employment. Employers may seek to reach separate agreement with employees in order to reduce pay in these periods.

Statutory Guarantee Pay (SGP)

SGP is payable to employees not provided with work by their employer on a day they would normally be contracted to work and is usually associated with employees who are placed on lay-off.

Employees need to have worked for the company for at least one month to be entitled to SGP.

Statutory redundancy pay entitlement

Employees placed on LOST for 4 continuous weeks, or 6 weeks overall in a 13-week period, may be entitled to claim statutory redundancy pay if eligible to do so. Employers can contest their claim, but will need to demonstrate a number of factors to successfully do so.