Employers Guide to Short time working in the UK

Short time working is reducing some or all your employees’ hours and/or pay them less which equates to less than half a week of their usual pay. This could be during periods of lower demand or slowdown in the amount of work available. The employee should receive full pay unless their contract allows unpaid or reduced pay. If the employees’ contract of employment allows for short time working and reduced pay, there will be a clause within the contract stipulating this.

Employers should ensure they have considered all other options before turning to short time working. For example, you could offer periods of unpaid leave, request employees use some of their paid holiday entitlement, offer flexible hours and encourage home working if possible.

SHORT TIME WORKING V LAY OFF

A lay-off is when your employees are off work for at least one working day, whereas short time working generally applies to a reduction in hours, but the employee still goes into work for part of the time. Lay-offs more often result in the employee being asked to stay at home for a period of time or take a period of unpaid leave.

SHORT TIME WORKING PAY 

Employees should be paid full pay during short time working, unless it has been agreed otherwise or their contract allows unpaid or reduced pay.

Some employees are entitled to statutory ‘guarantee pay’ for the days they do not work, provided they:

• have been employed continuously for 1 month (includes part-time workers)
• are available for work
• do not refuse any reasonable alternative work (including work not in the contract)
• have not been laid off because of industrial action

The statutory maximum amount of guarantee pay is £38 a day for 5 days in any 3-month period, i.e. up to £190. If the employee earns less than £38 each day, they should receive their usual daily rate of pay.

Part time workers’ entitlement will be calculated on a pro rata basis. Guarantee pay is not available on days where the employee works for part of a day.  If the employment contract includes provision of its own guarantee pay scheme, this cannot be any less than the statutory levels. Employees cannot claim both contractual and statutory guarantee pay.

If an employer fails to pay guarantee pay, they may face a claim for unlawful deduction of wages.

CAN YOU IMPOSE SHORT TIME WORKING ON ALL EMPLOYEES

There is only a right to impose short time working on your employees if there is an existing term within their employment contract that you permit you to do so in certain specified circumstances.

There is an obligation to state how your employees’ pay will be calculated during any period of short time working.

If there is no short time working provision in the employees’ contracts, you should check to see if there is a national agreement in your industry that includes short time working, or a collective agreement between your workplace and a trade union.

If none of these apply, your options would generally be to:

• Seek to make a temporary or permanent change to affected employees’ contract of employment. Meet with the relevant employees and explain why short time working is necessary and why you want to amend their contract of employment to include this provision. Explain the implications of not agreeing to the change in contract terms or to short time working, for example, it may cause compulsory redundancies.
• If your organisation has implemented short time working in the past (‘custom and practice’) with the consent of your employees, then you could argue that, by custom and practice, it is an established part of the terms and conditions of employment at your company. This can be a difficult justification to prove should the employee bring a legal complaint, meaning it is usually better to formalise the arrangement by obtaining your employees’ agreement and including the correct provisions into employment contracts when they are provided.

SHORT TIME WORKING IMPACT

Depending on how short time working is implemented and managed, there could be a number of possible effects on your business.

Effects on the employer

• There will be an increase in administration in making the change to short time working. If a change to employee contracts has to be negotiated in order for the employer to have the contractual right to impose short time working, this will impose considerable extra work with confirming contract variation etc .
• Morale may be negatively affected if the process is not handled carefully.
• Businesses may gain some much-needed ‘breathing space’ during an economic downturn.

Effects on workers

• Pensions – in a contribution-based scheme, the amount of contribution the employee makes will reduce, so the overall pension pot will not grow as quickly as it would have done. In a final-salary scheme, the overall value of the pension benefit could go down, as the level of the salary earned by the employee during short time working will be less.
• Tax – as the employee will earn less during short time working, they may pay less tax and be entitled to claim a refund from HMRC.
• Holiday – workers continue to accrue holiday during short time working
• Pay – this is the most obvious negative effect for employees. As long as they meet the eligibility requirements, your employees will be entitled to statutory guarantee pay.
• Benefits – employees may be able to claim Universal Credit or Working Tax Credit, or receive a higher level of this.
• Sourcing other work – employees should check their contracts of employment to see if they are allowed to undertake work for other employers during a period of short time working. It is considered reasonable for employers to allow this. However, employees must make sure that they are able to return to work for the original employer when needed, otherwise they may reasonably be treated by the employer as having resigned from their job.

LEGAL RISKS WITH IMPLEMENTING SHORT TIME WORKING. 

There are a number of risks for employers when implementing short time working.

If you impose or utilise short time working without obtaining the consent of your employees, or it is not written into their contract of employment you could face claims in the employment tribunal for unlawful wages deductions, breach of contract and constructive dismissal.

There is no time limit on how long short time working or layoffs can last, subject to provision in the employee’s contract. The law states that if an employee has been laid off or been put on short time working with less than half a week’s pay for either four or more weeks in a row, or six or more weeks in a thirteen-week period, then they can claim redundancy.

There are strict time limits surrounding the employee’s claim for redundancy under this procedure. First, they have to write to employer  to claim redundancy within four weeks of the last day of the short time working period. The employer then has seven days either to accept the claim or serve a counter-notice stating that work is shortly to become available. The work must be available to the employee within four weeks, and last at least thirteen weeks for the redundancy payment not to be due to the employee.

Should the employee not serve a counter notice, the employee must resign from their post to trigger redundancy pay entitlement.

If you need assistance with any contract employment matters please contact mlplaw Employment Team