What is a “lay-off” and when might you need it?

You may have a loose idea of what a lay-off is. It’s the kind of term that could be mentioned in a US blue collar drama, or bandied casually around over here.

Actually, it carries a very tight definition in UK employment law, and it is not making people redundant or dismissing them. It is one of the more complex areas of HR and carries significant risks.

So let’s take a closer look at lay-offs, how they work and when you might use them.

UK “Lay-off” definition

Laying-off an employee or employees means asking them to stay at home because there is temporarily not enough work for them to do. You can only do this if you have an express clause in your employment contracts permitting it, or one of the following applies:

• It is custom and practice in your business (and can be strongly evidenced).
• There is a national agreement for your industry.
• There is an agreement between you and a trade union.
• You agree with employees to a permanent change to the terms in the employment contract.

As you can imagine, it is not something to be done lightly, and other options should be explored first. These include taking accrued holiday entitlement, finding alternative work for them or unpaid leave.

Only employees can be laid off (not agency or zero hour workers). To be classified as a lay-off it must last for at least one day. There is no maximum term, but if a lay-off lasts for four weeks in a row or encompasses six weeks in a 13-week period, then your employee could apply for redundancy and claim redundancy pay. There is a process to this that must be followed.

Consider that your employees still have to live, and being laid-off may well represent a stinging financial blow to them. Therefore, there is some consideration around remuneration options which we will come on to. They may also seek alternative work to plug the gaps, if the employment contract does not forbid it, which could come with its own issues for you.

What may trigger lay-offs?

The overarching reason for lay-offs will be a temporary lack of work for employees to perform. There could be any number of reasons for this, but think events like a cyber attack on your business which takes down IT systems, a natural disaster like flooding, or problems with your supply chain.

What else to consider with lay-offs?

There is a statutory pay system to cover layoffs. Currently, this is £39 per day for up to five days within a rolling three-month period. To qualify for this they must have one month’s continuous service, reasonably make sure they are available for work, not refuse any reasonable alternative work and not have been laid off because of industrial action. Part-time workers would get this pro rata.

However, your contracts may set out your own guaranteed amount more generous than the statutory rules.

Beyond basic pay, there are other complexities of which to be mindful. These include the fact that statutory holiday entitlement and continuous service should still be accrued – they remain employed. You should also check the wording of your employee benefits agreements and salary sacrifice arrangements to see how you should manage these. 

Getting any pay matters wrong could lead to a tribunal claim such as unlawful deduction of wages.

Doing lay-offs correctly

So as you can see, lay-offs are no trivial matter. In fact, they may be considered high-risk with the chance of tribunal claims, redundancy applications, damage to employee relations and financial hardship for those laid-off. And all at a time when you yourself are probably feeling pressure because of business conditions.

Where a business has chosen to Google a template employment contract you may be particularly at risk. At The HR Dept we tailor employment contracts for you, so you avoid this pitfall, and a host of others that could catch you out. We offer them as a one-off service, or included within our retained Advice line. Ask us if you would like a review.