Even in the best run organisation, circumstances can sometimes arise which lead to a temporary reduction in work. When employees are not provided with work by their employer, and the situation is expected to be temporary, they are regarded as being “laid off”. Alternatively a situation may arise where an employer needs to not completely lay off an employee but may need to reduce working hours on a temporary basis until work improves. A typical situation would be where the business loses an important contract but anticipates successfully tendering for a new contract in the near future. Other scenarios may include an inability to carry out work due to a burst pipe at the business premises or adverse weather leading to it being impossible to carry out work.
An employer may tell employees not to turn up for work but there is no automatic right to withhold pay because insufficient work is available. Employees can however be laid off without pay or have their working hours reduced where there is a specific term in their contract allowing the employer to do so. The starting point therefore is to look at the contract of employment to see what it says. If an organisation has not provided employees with a written statement of main terms of employment, it is not only in breach of a requirement of the Employment Rights Order but it is missing out on an opportunity to write some potentially valuable flexibility into the contract of employment.
If there is no express right in the contract to lay employees off without pay or to reduce working hours, then consent of the employee must be sought. An employment contract is between two parties and it is not open to one of those parties to unilaterally amend the terms of the contract without the consent of the other. Often employees will consent to a temporary reduction in working hours or a short period of lay-off without pay on the basis that safeguarding the long-term interests of the business will help safeguard their own longer term employment prospects. If employees are fully briefed on the reasons why an employer feels there is a need to reduce hours or enter into a period of temporary lay-off and if the employer keeps the employees informed of progress, often agreement can be reached.
While an employment contract can give employers the right to reduce hours or lay off employees without pay, the Employment Rights Order requires that employers pay a retainer fee, known as a “guarantee payment” for days when an employee is not provided with work. The amount of the guarantee payment is reviewed annually and is currently £24.20 per day. It is however only payable for a maximum of 5 days in a 13 week period.
Laying off employees or reducing hours of work should be a temporary measure. Where an employee is laid off or has had their hours reduced to less than half their normal hours for 4 consecutive weeks or 6 weeks in any 13 week period, the employee can claim a redundancy payment unless the employer can show that normal working arrangements will resume within four weeks. For this reason in particular, it is important to act fairly when selecting employees for lay-off or a temporary reduction in working hours as claims of unfair dismissal could follow if an employee leaves work as a result of having been laid off and claimed a redundancy payment.
Collective Questions is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact us.
