COVID-19 lay-offs and redundancies: what you need to know

By Paul Holcroft, Associate Director at Croner 

With many organisations unfortunately facing serious business downturn as a result of the coronavirus outbreak, here are a few key areas employers must consider before implementing a period of lay-off.

What is a lay off? 

In practice, lay off is where an employer asks their employees to stay at home and not attend work. The legal definition of lay-off is a situation where an employer does not provide their employees with work where their pay depends on them carrying on work. Statutory lay off will only take effect where the employee is available for work during the period of lay off. For example, a period of sickness will not be classed as a period of lay off because the employee was not available for work during this time.

Can UK employers temporarily suspend employees on zero pay?

If there is a situation where there is no work, employees can be laid-off on zero pay provided; there is a clause permitting this in their contracts. However, they may still be entitled to statutory guarantee pay, which is currently £29 per day for a maximum period of five days and increasing to £30 from 6 April 2020. To be eligible to receive this, they will need to have been working for the company for at least one month.

Can employers temporarily suspend employees on reduced pay?

Employees can be laid-off on reduced pay if such a provision is included within their contract. If not, the lay-off will need to be at full pay. That said, employers may wish to negotiate a separate agreement with staff if the alternative to reduced pay during a lay-off situation is a redundancy.

Are employees entitled to any money if put on lay-off or short-time working?

What employees should be paid in a lay-off situation will depend upon their contract of employment. If there is a specific clause in the contract permitting this, the lay-off may be unpaid subject to any entitlement to statutory guarantee pay. Employers who do not have the contractual right to place employees on lay-off without pay will breach their employment contracts if they do not pay employees in full during this period and have not reached a separate agreement with them to do so.

Short-time working, by contrast, is where an employer requires employees to work fewer hours than their normal hours and receive less than half a week’s pay as a result. Again, how they should be paid will depend upon the terms of their contract; some contracts may provide employees with pay than is greater than half their weeks’ pay during periods of reduced working to avoid meeting the definition of short-time working.

Can lay-off trigger redundancy?

Employees who are placed on lay-off or short-time working for at least four consecutive weeks, or at least six weeks within a 13-week period, may be entitled to claim statutory redundancy pay. To do this, they will need to have been employed by the company for at least two years.

What if we have to consider redundancies?

In this circumstance, usual redundancy procedures will need to be followed, including consideration of alternative options and notifying staff. If more than 19 employees are affected, additional rules are surrounding collective consultation that employers will also need to adhere to.