Lay-offs and short-time working

Contingency measures for managing staff in times of emergency

Whether it’s uncomfortable reading or not, the reality of today’s world is that business owners will be seeking to protect their organisations in so far as they can during times of emergency. Being able to manage cash at such times is critical and of course, for the majority of businesses, staff costs form a huge part of contractual outgoings – so let’s explore layoffs and short term working.

Your employment contracts probably contain a lay-offs clause but, if they don’t, now is a good time to get that written in. You probably also have a short-time working clause which is another means of protecting your business.

But do you know how to use these clauses in case of emergency?

But let’s start with some future thinking, the balance always is to take steps to protect your business whilst being mindful of the need to engage and retain good employees – assuming you want your business to successfully come out the other side of this emergency.

Traditionally, redundancies were the only thing that came to mind in most businesses when considering cost savings, assuming employee benefits had already taken a hit, but there are other options if you want or need continuity of staffing.

What is a layoff?

Temporary layoffs or short-time working can be used as a temporary cost saving exercise, but they can also be useful in many circumstances, such as work shortages, power failures, severe breakdown of machinery, interrupted or shortage of raw materials or any other unforeseen circumstance beyond the Company’s control.

A permanent layoff, more commonly known as redundancy, sends the public message that the Company may be in financial difficulty. Even though often this is not true as you may well be trimming or realigning in order to better position the business, rather than deal with a financial crisis. In contrast to redundancies, temporary layoffs, if properly managed, can provide a bit of breathing space to manage your costs and cash flow whilst retaining valuable employees.

There is still the risk that your employees may find alternative employment during the temporary layoff period or request to apply for redundancy if a few weeks layoff extends to months. But by giving yourself the option of a temporary interim measure and by ensuring your employees feel engaged and well communicated with, you may find you can retain that all important talent that you have so heavily invested in.

While temporary layoffs or short-time working can provide a short-term solution to retain valued staff, it isn’t a solution for long-term problems where redundancies may be necessary. If you’re looking at making redundancies, and need some useful pointers, read

– redundancy risks, what you need to know.

Is there a difference between lay-offs and short-time working?

Temporary lay-offs differ from short-time working. Short-time working, results in the continuation of work for the employee, albeit with a reduction in either number of days per week or number of hours per day for a temporary duration. To be clear, with temporary lay-offs there is no work provided and no salary paid.

Considerations when introducing layoffs or short-time working

Clause in the contract – The first step is to check if there is a specific clause in the contract of employment that allows for temporary lay-offs or short-time working. In the absence of a clause, it isn’t possible to introduce a period of temporary layoffs or short-time working as this would be deemed a breach of contract – unless of course you put it to consultation and got agreement from your workforce.

If you don’t have such a clause, through consultation and obtaining employees’ consent, it’s possible to incorporate such a clause into the contract. We recommend to our clients that they carry out an annual review of their Employment Contract and Employee Handbook to ensure they are kept up to date with any legislative changes. Wrapping this additional clause within a suite of changes to the Employee Handbook would go some way to reduce the effect of the clause being seen as a negative message. Jaluch can support with contract and handbook reviews, get in touch with one of the team.

Using your layoffs or short-time working clause

When you become aware that it’s necessary to introduce a period of lay-off or short-time working, you should commence consultation with the affected employees to discuss and explore options. There is no minimum consultation period, but it is best practice to allow a reasonable amount of time for employees to come to terms with the temporary layoffs and have an opportunity to discuss what this means to them.

Consultation can take place in person or in writing and involves setting out what your thinking is, before a final decision is taken.

If consultation is new to you, why not ask Jaluch to give you a bit of guidance or even come in to talk to your staff for you?

What if you can’t consult as there is no time?

If you don’t have time for consultation, for example the WiFi has gone down leaving you with no means of communicating with your staff, we recommend an email (if possible) or a letter (if email isn’t possible) or a phone call followed up by a letter. In the worst case scenario, an advisory notice on your front door, advising each employee of the clause and your intention to apply it immediately, setting out what impact that will have on them.

Other than the final option, this of course, requires you to have access to your employee information (names, addresses, personal emails etc.) even in the event of a WiFi or power outage. Some might argue that this then creates potential for a data breach if you opt for written data being kept off site, as well as flawed data given that it won’t be easy to keep it continually up to date, but those are discussions for your senior team given the potential risks to your business.

The risk, if you don’t advise your staff of what you are doing or the fact that you have invoked your lay-offs clause, is that an employment tribunal in due course may consider full salaries owning to all staff involved.

Guaranteed Payments

If, after consultation, you go ahead with your decision to introduce a period of temporary layoff or short-time working then eligible employees are entitled to a Guaranteed Payment. To receive a Guaranteed Payment, the employee must have been employed continuously for at least one month, have not refused any reasonable alternative work and not have been laid off because of industrial action. There is a daily limit set by the government of £38 and it can be paid for a maximum of five days in any period of three months.

Applying for redundancy

While some employees will agree to temporary layoffs, others, after an initial period of layoffs will prefer to seek a redundancy payment ahead of finding alternative work. However, in order for an employee to apply for redundancy they must have been laid-off or put on short-time working either for four consecutive weeks or for a total of six weeks (no more than three being consecutive) in any period of 13 weeks.

In order for the employee to exercise their right to apply for redundancy, they must give notice within four weeks of the last of the weeks of layoff or short-time working.

The legal risks of lay-offs and short-time working

Failure to follow a proper process, whether that be redundancy, TUPE or layoffs can result in costly legal claims.
A lack of paperwork and record keeping is a common failing. It makes it much harder to demonstrate a fair process and justify your business decisions when there is a lack of paperwork to back it up. What is your contingency here if you have lost WiFi or power?
Remember that any significant change to Terms and Conditions means you are required to consult and gain consent from your employees. This would be the case for incorporating temporary layoffs and short-time working as an express clause in the contract of employment.
If an employee is wrongfully laid off or put on short-time working, they may be able to resign and claim constructive dismissal.
Failing to pay Guarantee Payments is an unlawful deduction of wages so if you are looking to lay off some of your staff, make sure you know their rights and pay them accordingly.
Always be mindful of your timescales for response – If an employee, who is eligible for redundancy, exercises their right to apply for a redundancy payment you have seven days to accept the claim for redundancy or give a counter notice. Don’t stick your head in the sand and miss important deadlines!
Decreased morale and reduction in productivity can cause harm to your business when employees feel the negative effects of poorly managed restructuring and downsizing programmes. When employees have concerns over job security and taking on extra responsibility for no additional remuneration this can have a huge impact on their individual performance.
Last, but not least, business reputation is paramount, so doing layoffs right is essential!

How to minimise these risks

Workforce planning

This is key for anticipating a downturn in the business and is an important tool to ensure the right levels of resourcing for your business.

Plan, Plan and Plan

Serious preparation and planning is required when looking to make redundancies or temporary layoffs. Not only could there be alternative options to mitigate the layoffs, such as internal transfers, that you may not have considered if you rush the process but proper planning can help mitigate risks.

Open Communications

A carefully thought out communication plan is essential to ensure any announcement is timely, effective and ensures employees aren’t left unsettled or unsure of their position. Ensuring all employees, wherever they are in the organisation, receive the same message is also key.

Show compassion

Employees may not necessarily know their specific employment rights but they will always have a view on whether they feel fairly/unfairly treated. Showing compassion to your people in difficult times can have a huge positive impact on their views of your business and your reputation.

Upskill Line Managers

Ensure your line managers have the knowledge, skills and confidence to effectively manage complex employment activities such as TUPE, Redundancy and temporary layoffs. Managers are not born – they need to be made – by you! So train them, coach them, support them, show them, mentor them and then, in turn, they will become great managers for your valued staff. Take a look at our management development programme.

How can we help?

Here at Jaluch we provide a range of HR support and guidance to hundreds of clients. No contract required. No need to sign anything in blood! Trusted and well established, we ensure a more personal, tailored support service to our clients than you will probably find elsewhere:

So you can stay focussed on revenue and delivery, why not ask us to resource your consultation, redundancy or layoffs project? We can also investigate or chair your grievances and disciplinaries to free you up for other business sensitive matters.
Bespoke or template HR letters, contracts or policies.
If your managers need to upskill and develop in areas such as restructuring, TUPE or Temporary Lay-Offs, we have a whole suite of management training material that you can purchase to deliver yourselves or alternatively have one of our experienced trainers deliver the training on your behalf.
Need ad hoc HR advice, or require extra resource for a project without having to sign up to monthly payments or an annual contract? We can offer an alternative and would be happy to discuss this in more detail.

Call 01425 479888 or send us a message to discuss any of these options in more detail.

Do you have experience of using layoffs or short-time working? Let us know in the comments below….

Lay-offs and short-time working (guidance for employers)