As today’s Jaguar Land Rover (JLR) headlines attest, when a major business suffers a cyber attack, organisations within its supply chain, and indeed its other stakeholders, can also be significantly affected. JLR’s suppliers are estimated to have a total workforce of around 100,000 people. Whilst those businesses lobby for government support to weather the ongoing decimation of demand for their products / services, we look at existing workforce management options for employers that find themselves needing to drastically reduce their production or services.
If they are to avoid making permanent changes to the size of the workforce or the terms on which it is engaged, employers may well need to temporarily reduce staff hours to keep costs down in an effort to keep the business afloat; they can do this by implementing lay-offs and short-time working.
Lay-off and short-time working
Lay-off and short-time working arrangements are temporary solutions for managing periods of reduced work. Traditionally associated with the manufacturing sector, particularly among factory workers and pieceworkers, these practices have recently expanded into professional services and salaried environments due to the increasing unpredictability of business cycles.
Lay-off refers to the temporary suspension of work and pay for employees, with the employment relationship otherwise remaining intact.
Short time working means employees continue to work, but on reduced hours, receiving reduced pay that is adjusted to reflect the hours actually worked.
When and how to take
These options are available not only for cyber attacks but for any events which cause a sudden loss of business such as workplace disasters or global pandemics that can force employers to reassess staffing needs. The main purpose of these arrangements is to support the business during difficult times, enabling it to survive without making permanent job cuts. For employees, these measures provide a degree of job security, as their employment continues and they may be recalled or returned to full hours as circumstances improve.
There is no automatic statutory right for UK employers to lay-off employees or to put them on short-time working and the ability to implement these measures must be based on specific provisions.
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Contractual right
Generally, there must be a clear term in the employee’s contract of employment explicitly granting the employer the right to lay an employee off or put them on short time working. Such terms are often incorporated into the employment contract via collective agreements negotiated on behalf of the workforce by relevant staff representative bodies or trade unions.
Where such a contractual term exists, it should specify that the employer can invoke it during a period of business interruption and should set out the relevant conditions and processes, ensuring transparency and mutual understanding from the outset of employment.
Whilst in some industries, it might be argued that established custom and practice operates to provide an implied right for employers to place staff on lay-off or short-time working, this is not the norm and seeking to rely on such custom and practice is considered risky. If unsuccessful it could lead to breach of contract or constructive unfair dismissal claims – see 3. below. -
Specific employee consent
If the contract does not contain a lay-off or short-time working clause, the employer must obtain the express consent of the employee (either directly or, where there are collective bargaining arrangements in place, via the relevant negotiating body or union) before implementing these measures. This often involves consultation and negotiation, and the employee may agree to such arrangements if it means potentially preserving their employment in the longer term. -
Absence of contractual right
Without a contractual provision or employee consent, employers cannot lawfully reduce hours or pay. If an employer is unable to provide work, employees are generally entitled to receive their normal pay as a failure will result in an unlawful deduction from wages claim.
Employees have the right to refuse reductions in hours or pay not specified in their contract. If an employer enforces such changes, it may be considered an unlawful wage deduction since employees must be paid as agreed in their contract.
Additionally, if the employer’s actions fundamentally breach the contract, and the employee has sufficient service, they could bring a claim for constructive unfair dismissal, arguing that the employer’s conduct forced them to leave their job. There is also the potential for such a ‘dismissal’ to amount to a redundancy with the associated redundancy payment attaching.
Essential best practice steps to consider
Any business looking to reduce working hours by laying off staff or moving them to short-time working must handle this with care to minimise legal risks and maintain morale. There are some essential points to consider.
Communication
Whilst there is no statutory minimum notice period for lay-offs or short-time working, good practice and fair treatment of employees dictate that as much notice as possible should be provided.
Open and honest communication helps set expectations and reduces uncertainty. Employers should clearly explain the reasons for the proposed changes, such as economic downturns, supply chain disruptions, or other unforeseen circumstances impacting the business. Employers should outline the anticipated duration of the measures, if known, or provide regular updates as the situation evolves.
It is also important to clarify what employees can expect during this period, including how and when their status or hours might change, and what support or assistance will be available. Employers should create opportunities for employees to ask questions and express concerns, demonstrating empathy and a commitment to working collaboratively through the challenge. Clear communication not only helps maintain morale but also fosters trust and transparency, which are essential for navigating periods of uncertainty together.
Documentation
Employers should ensure that any agreement or variation to the employment contract, such as changes to working hours, pay, or the introduction of lay-off or short-time working arrangements is confirmed in writing. This written confirmation not only provides clarity for both the employer and the employee but also ensures that there is an accurate record of the agreed terms, which can help prevent misunderstandings or disputes in the future.
The written agreement should clearly state the changes, reasons, and expected duration, as well as outline the employee’s rights and entitlements during this period. Ideally, both the employer and employee should sign and retain a copy for their records. Documenting changes in writing ensures transparency, accountability, and legal compliance, protecting both the employer and employees.
Support
Employers should consider offering support to employees affected by lay-offs or reduced hours. This can include guidance on statutory guaranteed payments (see below), signposting to financial assistance or benefits, providing access to mental health and well-being resources, and ensuring open lines of communication for questions or concerns. By proactively supporting employees, businesses help reduce anxiety, strengthen trust, and foster a more resilient workplace during periods of uncertainty.
Employment rights and pay during lay-off and short-time working
During lay-off or short-time working, the employment relationship continues and therefore continuity of service continues to increase and employees retain employment rights such as their protections against unfair dismissal, discrimination etc, and their entitlement to accrue statutory annual leave.
Eligibility for statutory payments such as statutory sick pay, statutory holiday pay and statutory maternity pay, and auto-enrolment pension contributions also continue, but the amount of an individual’s entitlement can be affected by the reduced pay received whilst on lay-off or short-time working.
Entitlement to non-statutory or contractual benefits will depend upon the provisions of the employment contract, relevant policy / scheme or, if none, the lay-off or short-time working terms agreed with the workforce at the time. Staff who are already on leave at the point lay-off or short-time working is introduced are not necessarily ‘available for work’ and so will not, on the face of it, be caught by the lay-off or short-time working arrangements whilst they are on such leave.
Accordingly, employers should carefully consider and make provision for how / whether contractual benefits such as enhanced sick pay, maternity, adoption and paternity pay will operate during periods of lay-off or short-time working; both for individuals whose entitlement would normally have commenced during the lay-off or short-time working period and for those who were already receiving those benefits when the measures were implemented. Clearly, the employer’s priority at these times is to make financial savings so they may seek to limit access to some or all of these potentially costly enhancements.
Whilst withdrawal of these benefits will assist with that cost-saving aim, it is unlikely to be well received by staff as a new proposition at a time of crisis; far better that it is an established and mutually understood and agreed principle well before it needs to be relied upon.
In addition to the retention of existing employment rights, employees on lay-off or short-time acquire specific additional statutory rights:
Statutory guarantee payments
Employees who are laid off may be eligible to receive a statutory guarantee payment (also known as statutory lay-off pay), which acts as a form of financial support during periods when work is not available. This payment is generally available for up to five workless days within any three-month period, as long as the employee meets certain eligibility criteria such as having at least one month’s continuous employment with the employer and being available for work. The statutory guarantee payment is intended to alleviate some of the financial strain caused by a temporary reduction in working hours or the complete absence of work but, currently set at a maximum of £39 per day so a total of £195 for three months, offers only limited assistance. Of course, it may be the case that the lay-off arrangements that an employer has with its employees provides for more generous lay off pay because of collective agreements in force.
Right to claim redundancy pay
Employees with sufficient service (two years’) may be entitled to claim a statutory redundancy payment they have been laid off or put on short-time working and received less than half a week’s pay for either four consecutive weeks or six weeks or more within a 13-week period.
To claim a statutory redundancy payment, the employee must follow a specific statutory process including serving notice of their intention to make the redundancy pay claim and resigning from their employment with appropriate notice. If the employer expects work to resume within four weeks of the employee’s notice of claim, the employer may be able to resist the claim for redundancy pay; again a specific statutory process applies.
Comment
Managing staff during business interruptions is one of the most challenging tasks an employer may face. Temporary lay-offs and short-time working, when used lawfully and sensitively, offer a way to preserve jobs and give the business a chance to recover. By understanding the legal framework and best practice, employers can navigate these difficult periods with greater confidence and security and seek to share those benefits with their staff.
Seeking timely advice from your legal professionals at Weightmans can help navigate these challenging situations.
This insight is co-authored by Associate, Rupinderjit Sandhu.
