If you have no work for employees, perhaps because events have been cancelled due to Coronavirus strategies, then laying employees off may be one option.
The first question is whether you have the contractual right to lay-off employees. If you do then the terms and conditions of employment document or written contract of employment will contain a clause.
I do have a lay-off clause
This provides you with the opportunity to lay-off employees, under any terms described in the contract.
There is guaranteed pay which you will have to meet, currently £29 per day for 5 days in a 3 month period. Even though it will rise to £30 per day in April, that is not very much.
Furthermore, if the lay-off runs for four weeks (or in certain cases 6 weeks), then employees may be able to claim redundancy and the appropriate payment. That payment could well cost more than four week’s pay for any employee with more than a few years’ service. Please talk to us if you foresee a lay-off becoming extended.
What if I do not have a lay-off clause in the contract?
You can lay-off employees by mutual agreement. You need to consult with them first, not exert undue pressure, and if the alternative is closing the business, employees may agree. Record any mutual agreement in writing. Employer Solutions can draft an appropriate letter on request.
If you lay employees off without agreement that is a breach of contract. Employees can claim that you have dismissed them. One or more employees might do this and fighting such claims may not be worthwhile. Your other, potential, challenge is a “protection of wages” claim. An employee can do this without leaving your employment. Also, you cannot “victimise” them if they do.
But if lay-offs are common in your sector, or if you have done lay-offs in the past with impunity, the risks could be different. Simply tread carefully!
Laying-off employees is problematic and is best regarded as a last resort.
There are other possible options, see below.
Other possible options:
Holiday is an entitlement, so you cannot necessarily insist that it be taken.
Voluntary pay reduction
If your employees will agree to this, then it is an option. Against a backdrop of a possible lay-off, or especially possible collapse of the organisation, then this might be achievable. Usually there is a commitment to resume normal pay when possible or even pay back the shortfall over time. Without an agreement you run risks.
Malcolm Martin FCIPD
Author Human Resource Practice
Blogs are for general guidance and are not an authoritative statement of the law.