Managing a Temporary Shortage of Work

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Definition of Lost

‘Lost’ is how a lot of business owners generally feel when faced with the prospect of a temporary downturn in work levels or when events such as flood or fire affects their ability to run their business.

Questions loom such as, how do I protect my business? Do I have to close the business down, make my employees redundant? How will I pay their notice and redundancy pay? Will I then face costly tribunal claims?

However, the term ‘lost’ takes on a new meaning here namely, ‘Lay Off/ Short Time’ working. It’s something small businesses know little about, and it really can mean the difference between weathering the storm of having to temporarily cease or reduce trading.

Lay off

When we hear the expression ‘lay off’ or someone having been ‘laid off’, most people think this means redundancy. It doesn’t. Instead, it is where you have the option to keep your employees away from work without their contractual pay/salary whilst maintaining their employment.

So, whether it’s a delay on a contract or project starting or water damage following a burst pipe, you can place employees on lay off.

I have some work for my staff to do, can I use lay off for just 1 day?

Yes. Lay off can be for 5 days a week or 1 day a week.

What about their pay, are they not entitled to anything?

Statutory guarantee pay (SGP) is payable where at least 1 day of work is lost. The current rate is £28 per day for a maximum of 5 days in a 3-month period. Depending on the individual circumstances they may then be entitled to benefits.

BEWARE: SGP is a statutory payment- failure to pay this will give your employees the right to bring a claim against you before an employment tribunal. 

What if I offer work and my employees refuse?

Employees must make sure they are reasonably available for work and cannot turn down reasonable alternative work.

I placed an employee on lay off and he has another job. He’s saying I haven’t given him enough notice and is refusing to come in. What can I do?

Employees can take up other work whilst on lay off but as soon as you instruct the to return to work, they must do so. No notice is required by you. Disciplinary action can be taken for persistent refusal to return to work.

I have some work coming in, but my employee says its not in her job description. Can she refuse?

‘Reasonable’ is the key word here. If it is within her capabilities, is safe and does not place her at a detriment due to unreasonable travel or a complete change of usual shift patterns for example, then it cannot reasonably be turned down.

Short time working

Short time working involves an employee’s contractual hours being temporarily reduced.

It is still used for the same reasons as lay off but, in this instance, no full days are lost and therefore SGP is not payable. Instead employees are paid for the reduced hours that they work.

The above stipulations around not refusing reasonable alternative work and being available for work apply to short time working as well.

FAQ’s regarding LOST:

  1. Do you have to give notice of LOST?

No but you are required to confirm it in writing.

  1. Does it have to apply to everyone in the company?

No but there does need to be a genuine temporary downturn in the work the employee does.

  1. Do you need to carry out a selection process or have a selection criterion when selecting which employees to place on LOST?

No, as long as there is a genuine downturn in the work the employee does and your reasons for selecting them are not discriminatory. For example, please don’t just lay off all your part time employees or the ones who have just announced they are pregnant!

  1. Can any company use LOST?

Yes, if you have the contractual right to do so i.e., a specific clause in the contract or employee handbook.

  1. I don’t have a clause, what would happen if I used LOST?

This would be an unlawful lay off or short time working situation and any losses in wages would be unlawful. You are at risk of constructive dismissal, unlawful deductions in wages and breach of contract claims. The same applies if you use LOST where it is in the contract and the employees haven’t been issued with their handbooks or contracts.

REMEMBER- a contract or handbook sat on a shelf gathering dust or filed away in a drawer is no use to anyone.

  1. Can LOST continue indefinitely?

In theory it could but in practice it is not advised. If the downturn in work is expected to be long term, then seek advice regarding redundancy.

Be aware that an employee is entitled to claim redundancy pay (subject to eligibility) where they have been placed on lay off without pay or on short time working receiving less than half a week’s pay for 4 consecutive weeks or 6 weeks in a 13-week period.

Do’s & Don’ts

DO– use LOST where you have the contractual right to do so

DO– use LOST where there is a genuine and TEMPORARY loss of work

DON’T– use LOST if you do not have the contractual right to do so

DON’T– use LOST as a sanction for poor conduct!

In summary – LOST can be a very useful tool where an unexpected turn of events affects workload, it can bring down your payroll costs quickly whilst not having to make mass redundancies.

However, it is easy to get wrong and can be a costly mistake to make- take advice from our experts before taking action.

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Elena Boura