Lay off guide

09 July 2019

If you don’t have enough tasks available, laying employees off work is an option your business can consider.

The process is a short-term solution if you’re going through difficulties—or don’t have the work for a specific staff member.

This guide explains why laying people off may be a good option for you, along with the legal considerations you’ll have to keep in mind.

Remember, if you need immediate assistance with your workforce then you can refer to our HR outsourcing and services for instant support.

And we also offer coronavirus advice if you have any questions about the current pandemic and how it affects your business.

To help you deal with this international crisis, we’ve opened our HR helplines to give employers affected by COVID-19 access to a free advice call.

So, for quick answers to questions on furloughs, lay-offs and the Job Retention Scheme, call 0800 028 2420.

What does “laid off” mean?

To lay someone off is a temporary (or sometimes permanent) removal of an employee from your business.

You can also place them on short-time working or tell them to take holiday time.

A period of lay-off will only be classed as statutory lay-off where it meets this definition—they haven’t been paid for a week as their employer doesn’t provide them with work (where their pay depends on carrying out work).

For example, an employee who is paid an annual salary—but isn’t provided with work for a period—won’t be placed on statutory lay-off as their pay isn’t dependent on being provided with work. ­

However, you can usually only take this approach if you have a lay-off clause in your employment contract.

Although there can also be an agreement between you and a union. You can also have a discussion with your employee.

You may come to a mutual agreement about the nature of the time off from work. If you’re laying off employees, small businesses can use the process if there’s a limit to the amount of work available.

Medium and large organisations can do the same, but it’s particularly effective for smaller brands with tight budgets to stick to.

Although a lay-off period sounds like a drastic step (especially from your workforce’s perspective), you can implement it in minor ways. It can last for a number of days, or a matter of hours each week.

There’s no legal limit to how long you can lay someone off for. But your employees can claim redundancy if they have two years’ service and are placed on lay-off or short time for either four or more consecutive weeks—or six or more weeks—within a period of thirteen weeks.

 This is where no more than three weeks are consecutive. To claim this they’ll have to resign, so you’ll need to provide them with work to avoid this situation potentially occurring.

How to lay-off employees

You should create a plan so you can approach the requirement respectfully for your employees, but also with current laws in mind.

Remember, if an employee is laid off work, it can be demoralising for them. As such, you should think carefully about:

  • Who you need to lay-off from your organisation.
  • Discuss with your HR department or employment law specialist about the best approach to take off.
  • Be open with your workforce. Discuss with them the situation, such as whether the business is struggling or your just lacking work.
  • Make the appropriate appointments and explain the situation to those who you’ll lay-off.
  • Provide the employee with a letter detailing what’s happening (we explain this in more detail further below).

What to say when laying someone off can be a difficult conversation to approach. Emotions may run high and the situation could descend into an argument if you’re not careful.

It’s important to remain calm when you have difficult conversations in the workplace—no matter how anxious an employee may get.

And it helps if you speak to the individual in a polite manner. A lay-off example sentence may go as follows:

“After careful consideration, we have to, unfortunately, place you on a temporary period of lay-off. We appreciate this may be a difficult outcome for you, so please remember this is only a temporary situation.”

Your employee may have questions about whether they’ll lose their job in the long run, or if they’ll receive pay while they’re off work (we explain this issue further below).

Laying-off due to coronavirus

It’s a pressing issue if you’re facing the need to terminate employment contracts. The coronavirus pandemic has led to much debate about laying-off staff.

Before you do that, remember the UK Government has introduced various measures to help businesses and employees, but it’s important to understand your rights.

As well as the rights of your employees—contract of employment terms still apply during the pandemic.

However, laying-off workers to cut costs is happening in many industries because of the coronavirus outbreak.

Although many businesses can lay-off employees if necessary during this time, the government has provisions in place to try and limit the risk of this. And to support you directly.

We explain these below but, remember, you can contact us on 0800 028 2420 for immediate assistance with any business-related coronavirus questions

Lay-off without pay

This is the big question for many small and medium-sized businesses. Can you lay-off staff without pay?

Unless you have a clear lay-off clause in your employment contracts to do so, no you can’t. You must pay them if you lay them off. Here’s a sample lay-off clause in employment contract:

“In the event it is a requirement for the business, full pay will not be due during periods of lay-off.

We will pay your statutory minimum guaranteed pay during this time. It is payable for up to five workless days in any three-month period.”

However, keep in mind you can’t add this into your employment contracts now with your long-term staff.

Changing their contracts will require an agreement.If you terminate a contract without agreements than it may lead to an employment tribunal claim. You’ll need to get an agreement.

Instead, you can turn to the government’s supporting measures to take lay-off options that protect your business and your employees. We explain these below, but they include:

  • The Job Retention Scheme.

Can a company lay-off without notice?

In some circumstances, you must provide a notice to a member of staff before you lay them off.

For example, with furlough, you’ll need to inform your employees of the details. This includes:

  • How long furlough will last.
  • The pay they’ll receive, including any additional amounts from your business to the government’s 80%.
  • If there will be further extensions to furlough after the initial three-week period.

Job Retention Scheme

The UK Goverment has set up this scheme to support businesses and employees during this time.

This is the furlough measure you’ve no doubt heard of. It includes covering 80% of their monthly wage. You can choose to then add to that amount—that is up to your business. Legally, it isn’t a requirement.

To apply for the Job Retention Scheme, you must decide which departments of your workforce to furlough.

Then you’ll need to use HMRC’s online portal to make a claim, after which you should receive a grant.

Payments are backdated to 1st March 2020 and are expected to begin from 20th April 2020.

You can read our guide to the Job Retention Scheme for further assistance.

Furlough—a lay-off period

One way to approach lay-off is to provide some of your staff with temporary leave.

This is furlough—the Government will offer your business 80% of the wages they earn. You can then pay the remaining 20% if you wish.

Ultimately, putting your employees on furlough can save you money. But it also prevents the loss of your employees—they’ll return to work as normal when their furlough ends.

So, it’s a temporary lay-off, of sorts. But one where you and the employee agree to it.

During this time, you should work out the possibility of short time working vs temporary lay-offs.

You can choose to let staff continue on with reduced hours if it suits your business, although you’ll need to discuss this with them. And get their agreement.

The alternative is to place them on furlough, which will provide your staff with 80% of their monthly wage.

How to write a temporary lay-off letter

Communication is essential during the process to make sure your business has records of all events, but also to keep your employees up to date.

You should write a letter to each employee your decision affects. The below template is a guide for your business.

Please keep in mind you should adapt the letter to suit your business and the arrangements you’ve decided upon. Amending it is essential to avoid any potential legal complications.

*Start of template*

[Business letterhead]

[Business details]

[Address]

[Date]

Dear [employee’s name], It is with regret we have to inform you that we are laying off certain employees due to [explain the reasons for your decision].

Please rest assured that this is only a temporary situation. And you will receive pay during this time [indicate whether this is SGP (statutory guarantee pay), full pay, or nothing—it would be the latter if they’ve worked for the company for at least one month].

The date for your lay off begins on the [date].

A return to work will commence from [include this date if you know for sure—otherwise, make it clear when you expect this to be].

In the event this date changes, there will be calendar notice of 14 days. Yours sincerely, [Manager’s name]

*End of template*

Lay off pay

You don’t have to pay employees if there’s a specific clause in their contract. You have to pay SGP if you have a lay-off term in your contract.

There’s a limit to this—it’s five working days within every three-month period. You can tell your employee they can claim job centre allowance payments on the other days.

But for statutory guarantee payments, employees can claim them if you’re not providing work when they normally would receive it.

The maximum payment to a staff member is £30 a day from 6th April 2020. For the five days across three months, that totals £145.

As we mentioned above, employees can claim for redundancy payments if they’re off for four weeks or more, or six weeks or more over 13 weeks.

If they do that, they’ll need to notify you in writing. But if they return to work with you within four weeks then you won’t have to pay them.

Need our help?

If you’re in need of advice about this topic, get in touch and we’ll talk you through the laying off process: 0800 028 2420.

Suggested Resources