Advice leaflet - Lay-offs and short-time working

There is a general right at common law to tell most employees not to turn up for work but there is no general right not to pay them because work is not available.

• This can be done where there is an express contractual right agreed between employer and employee. Alternatively, there may be an agreement covering the issue between the company and the union, or a national agreement for the industry which the employer follows. Such an agreement has contractual force only if it is incorporated into the individual employee's contract of employment.
• The right of an employer to lay off may also be implied if it can be shown (by clear evidence) that it has been established over a long period by custom and practice.

Both parties may agree to alter the contract terms so that the lay-off is not a unilateral act by the employer but by mutual agreement (eg: where the only alternative is redundancy). This will not necessarily mean that the employee has agreed to a variation in the employment contract giving the employer the power to lay off unilaterally without pay in the future.

• Employees can be laid off without pay where there is a specific term in their contract allowing the employer to do so.
• When employees are laid off, they may be entitled to a statutory guarantee payment from the employer. Payment is limited to a maximum of five days in any period of three months and the daily amount is subject to an upper limit which is reviewed annually. For more information on guarantee payments see the BERR leaflet Guarantee Payments - Guidance. The website www.direct.gov.uk has specific information for employees if they get laid off.
• On days on which a guarantee payment is not payable, employees may be able to claim Jobseekers Allowance and should contact their local Jobcentre about eligibility.

In these circumstances, on the application of all parties to the agreement, the Secretary of State can make an exemption order excluding employees from the statutory right to a guarantee payment. In practice an exemption order will be granted only where the collective agreement or order contains guaranteed pay provisions which are at least as favourable overall as the statutory scheme.

This will depend on the terms specified in the contract. However, the employee may in certain circumstances give his or her employer written notice of an intention to claim a redundancy payment.

If there is no contractual right to lay off without pay but the employer does so, he or she will be acting in breach of contract. The employee may:

• choose to accept the breach of contract and treat the contract as continuing, while claiming a statutory guarantee payment. 
• sue for damages for breach of contract in the civil court or, in certain circumstances, at an employment tribunal.
• claim before an employment tribunal that there has been an unlawful deduction of wages under Part II of the Employment Rights Act 1996.
• claim that the employer's action amounted to a dismissal (constructive or otherwise), giving rise to a potential claim of unfair dismissal and/or, if eligible, redundancy pay. (This is a complex area and further advice should be sought, for example from a solicitor or your trade union).

• Short-time working occurs when employees are laid off for a number of contractual days each week, or for a number of hours during a working day.
• As in the case of a lay-off, the employer must have an express or implied power in order lawfully to reduce the amount of pay. Normal practice would be for the workforce or their union to agree to short-time working as an alternative to redundancies.
• Where there are no express or implied rights to short-time working, employees may claim that the employer's action amounted to a dismissal (constructive or otherwise) and complain to an employment tribunal of unfair dismissal. (This is a complex area and further advice should be sought, for example from a solicitor or your trade union). They may also sue for loss of wages in a civil court or, in certain circumstances, in an employment tribunal or claim that the employer has made an unlawful deduction of wages under Part II of the Employment Rights Act 1996 (to an employment tribunal only).
• Employees placed on short-time working may be able to claim Jobseekers Allowance for the balance of the hours they do not work. Advice on eligibility may be obtained through a local Jobcentre.

If an employee is either laid off (that is, receives no wages) or put on short-time working (that is, receives less than half a week's pay) for four consecutive weeks - or for six weeks in a period of 13 weeks - because of a shortage of work, the employee can give the employer written notice that he or she intends to claim a redundancy payment.  

Last printed version: January 2006
Last updated web version: Dec 07

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