Hassle Free HR – Lay Offs / Short-Time Working (LOST)

Due to the coronavirus outbreak, you may need to consider laying-off staff or implementing a period of short-time working, to manage either a temporary business closure or a down-turn in work. If there is an explicit lay-off / short-time (LOST) working clause in the employees’ contract of employment this is easy to do, but where there is no explicit clause in the contract, you will need to consult with employees in order to gain their agreement to a lay-off/short-time working period, as an alternative measure, to redundancy.  If you proceed without your employees’ agreement, then you are risking a breach of contract claim.

Notice

Your employees have no statutory right to notice of your intention to implement a temporary lay-off or period of short-time working.

Statutory Guarantee Pay

During a temporary lay-off or period of short-time working, your employees are entitled to statutory guarantee pay (SGP).  This is an amount payable to employees who are not provided with work by their employer, on a day they would normally work under their contract of employment. The rate of SGP is set by the government and is £30 per day.  It is payable for a maximum of 5 days in any 3-month period for a full-time worker, pro-rated for part-time employees.

There are exclusions to SGP as follows;

  • Where the employee has less than one month’s continuous employment counted on the day before the period that the lay-off or short-time working begins
  • Where they were not provided with work on the day because of a strike, lock out or other industrial action affecting their employer or an associated employer
  • Where they were offered suitable alternative work on this day by their employer, taking into account all the circumstances and not limited to the employee’s normal role, but the offer was unreasonably refused
  • the employer places reasonable requirements on the employee to remain available for work, if such work becomes available, and the employee fails to comply with these requirements.

As well as the daily cap, the payment of guarantee pay is limited to a maximum of five days of SGP paid within any rolling three-month period. Therefore, for each workless day, you are required to assess whether your employee has been paid the maximum of 5 days of SGP within the previous 3 months.

Statutory Redundancy Payment 

Whilst placing employees on a temporary lay-off or period of short-time working is a practical step to manage either a temporary business closure or a down-turn in work due to Coronavirus, you do need to consider that using these measures could result in employees becoming entitled to a statutory redundancy payment (SRP).  To be entitled to SRP, the employee must have;

  • a minimum of two years’ continuous service
  • been placed on a temporary lay-off or period of short-time working for either;
  • 4 or more consecutive weeks or
  • 6 or more weeks within a period of thirteen weeks, where no more than 3 weeks are consecutive
  • provided notice of their intention to claim SRP
  • resigned with appropriate notice

Notice of intention to claim SRP

To receive their SRP, the employee has to provide you with statutory notice of their intention to claim this payment. This notice must be in writing and state that they are making a claim for a redundancy payment in respect of being placed on temporary lay-off or a period of short-time working. The notice should then be posted or hand delivered to the Company / you. There are no further statutory requirements for the contents of the notice.

This must take place either on the last day of the week spent on lay-off or short-time, on which the employee is basing their claim on, or within a 4-week period of the above date. This time limit is strictly applied and cannot be extended, even by an employment tribunal. A notice which is served too early will not be valid. However, there is nothing to prevent employees from serving a second notice at a later date to comply with the time limit, if their first notice wasn’t valid.

Counter Notice to Contest a Claim

You may wish to contest your employees’ claims for statutory redundancy pay, however, you can only contest this in limited circumstances and you are required to follow a statutory procedure. A claim can be contested, where it is reasonably expected that;

  • the employee will be provided with a period of employment lasting at least 13 weeks
  • they will not be placed on lay-off or short-time working for any of these weeks and
  • this period of employment will start within 4 weeks of the date the employee’s notice to claim was served

Where the employee is reasonably expected to be provided with work, you will need to serve a counter-notice explicitly stating that they contest the liability to pay a statutory redundancy pay. The counter-notice has to be served to the employee within 7 days of service of their notice of intention to claim, and must either be given to the employee by hand, or posted to their address.

As with the employee’s notice to claim, the time limit for you to serve the counter-notice will be strictly applied and cannot be extended. Additionally, any counter-notice which does not state that you are contesting the liability will not be valid, for example, if this merely informs the employee that they can return to work at a specific date.

Contesting the claim, even after serving the required notice, will automatically fail if the employee is not provided with the minimum period of employment within 4 weeks of their notice to claim, i.e. they remain on lay-off or short-time working for this 4-week period.

You can decide to withdraw your counter-notice if you become aware that there is no possibility of the employee being provided with the required period of employment, or that this will not become available within 4 weeks of the employee’s notice of their intention to claim. To withdraw the counter-notice, you will have to provide the employee with written notice of their withdrawal and this can take place at any time. Where you do not withdraw the counter-notice, an employment tribunal will determine whether the employee is entitled to receive redundancy pay.

Last reviewed 3 June 2020