The term ‘laid-off’ is often used colloquially to describe the situation where an employee is dismissed by reason of redundancy. However, in employment law terms, it has its own, specific, meaning. The legal concept of ‘lay-off’ involves the employer instructing the employee not to come to work for a period of time where the reason is either a diminution in the requirements of the employer’s business, or any other occurrence that has affected the normal working of that business (for example, poor weather). Employees can only generally be ‘laid-off’ if the employer has included a right to lay-off in the contract of employment. If they have, and circumstances arise where the employer needs to lay-off staff for a period of time, then they are able to use this clause. 

What does the employer need to pay during lay-off?

There is a calculation set out in law for working out guarantee pay – it involves multiplying the number of normal working hours on a lay-off day by the guaranteed hourly rate (the amount of one week’s pay divided by the number of normal working hours in a week for that employee). Statutory guarantee pay is capped at £39 per day – this low cap will be hit by most employees.

The maximum an employee can get is £39 a day for 5 days in any 3-month period. 

What are the limits of lay-off?

Statutory guarantee pay is low. Paying it in anything other than short-term emergency situations is likely to damage employee relations. For this reason, lay-off should be used only in cases of real need by the employer.

If lay-off continues for a prolonged period, then employers run the risk of employee’s resigning and claiming redundancy pay. An employee with 2 years’ service can apply for redundancy and claim redundancy pay if they’ve been laid off for a period of:

  • 4 or more consecutive weeks
  • 6 or more weeks in any 13-week period

To claim redundancy, an employee would need to write to you within 4 weeks of the last day of the layoff. You will then have a period of 7 days to either accept the employee’s redundancy claim or give them a written counter-notice. If you fail to provide the employee with a counter-notice, you can be treated as having accepted their claim.

A counter-notice means that you expect work will soon be available, although this work must commence within 4 weeks and last at least 13 weeks. 

Top tips

  • Check your contracts of employment. If you work in an industry which is impacted by short-term closures (for example, those who work outdoors or in weather dependent industries) then consider adding a lay-off clause if you don’t already have one.
  • Think carefully about whether lay-off is the right option in any given circumstance. Even a short period of lay-off can damage employee morale and business reputation. Consider whether alternative options – for example, asking employees to take holiday or offering alternative work – might be better for both you and them.
  • Clearly diarise key dates when lay-off is in play – including the 4 weeks after which a redundancy payment can be claimed and the 7-day deadline for issuing a counter-notice.

Speak to Jon Dunkley

Jon is a Partner at Wollens and can advise you. Contact Jon via email jon.dunkley@wollens.co.uk or call 01271 341021.

Jon Dunkley - Wollens Solicitors Devon

You can also complete an online enquiry form. One of the Wollens team will contact you as soon as they are available.