Andrew Willis, Head of Legal at Croner, explains everything employees and employers need to know about lay-offs and short-time working, collectively referred to as ‘LOST’.

What is the difference between lay-offs and short-time working?

Lay-offs and short-time working, collectively referred to in the UK as ‘LOST’, are often considered the same issue as both are used to address a shortage of work. However, these are two distinct concepts, with different definitions under the Employment Rights Act 1996, and companies need to have a firm understanding of both:

• In practice, a lay-off is where an employer asks an employee to stay at home and not attend work for a temporary period (at least one working day). A statutory lay-off will apply where an employee has not been paid for a week because their employer hasn’t been able to provide them with work to do.
• Short-time working is when an employer requires their employee to work less than their regular contractual hours, eg three days a week instead of five.

When can employers lay-off or put employees on short-time working?

Employees can only be placed on lay-off or short-time working if they have given their prior consent. Trying to enforce lay-offs or short-time working without the correct contractual clause will open employers up to tribunal claims. As a result, many employers choose to include LOST clauses within employment contracts.

In the absence of any clause, employers may consult with staff and ask them to agree to a period of LOST at the time in question. As staff may be reluctant to accept, employers may have to explain that the arrangement is more favourable than the alternative of being made redundant. This would be especially pertinent for employees with less than two years’ continuous service, who would not be entitled to claim redundancy pay in this situation.

What are employees’ pay rights during lay-offs and short-time working?

While placed on LOST, employees with one month’s service will be eligible to receive statutory guarantee pay (SGP) to compensate for the reduction in available work. Individuals will be entitled to SGP for every workless day – this is a day in which they would typically be required to work but their employer has not provided them with any work.

To calculate SGP, an employer must multiply the regular hours that the employee would have worked on the ‘workless day’ by the ‘guaranteed hourly rate’. The most an employee can receive each day is capped at £29 and the payment of SGP is limited to a maximum of five days within any rolling three-month period.

Employees can claim redundancy pay if they have been placed on LOST for four weeks in a row, or a total of six weeks in any 13-week period and are earning less than half their usual weeks’ pay. To receive redundancy pay, employees must resign from their position and provide their employer with written notice of their intent to claim. Employers can counter this and avoid costly redundancy fees if they can guarantee the employee 13 consecutive weeks of work within four weeks of receiving this notice.

When are lay-offs and short-time working a good option?

From an employer’s perspective, the ability to utilise LOST will give them greater flexibility during times when work is not available, either due to a reduction in demand or temporary closure. LOST clauses provide employers with the ability to save money on their wage bill during these times, while also enabling them to retain staff.

As far as employees are concerned, being placed on LOST will not impact their continuity of service.

About the author

Andrew Willis is Head of Legal at Croner and assumes additional responsibility for managing Croner’s office-based telephone HR advisory teams, who specialise in Employment law, HR and Commercial Legal advice for large organisations across the UK.

See also

What are your redundancy pay rights in the UK?

What are your paternity leave entitlements in the UK?

Five upcoming employment law changes your company needs to be aware of in 2020

Find out more

Lay-offs and short-time working (Gov.uk)

Redundancy: your rights (Gov.uk)

Employment Rights Act 1996 (Legislation)

Image: Getty Images

Publication date: 29 November 2019