Statutory guaranteed pay and coronavirus

29 May 2020

There are occasions when your business can offer no work to employees, but you still have to pay them.

One such example is statutory guarantee pay. It’s a potential option for your business during the coronavirus pandemic.

That’s whether you’re reopening after lockdown, or don’t have the standard amount of work available for staff.

If you don’t want your employees to work on a specific day, it’s a genuine option. And it’s one we explore in this guide.

But don’t forget, you can contact us on 0800 028 2420 if you need immediate assistance during this time.

What is statutory guarantee pay (SGP)?

It’s an amount payable to employees who aren’t provided with work by you, on a day they’d normally work under their contract of employment.

But that’s only in specific circumstances. Under section 28 of the Employment Rights Act 1996, eligible employees have entitlement to SGP.

In the business world, the payment is typically associated with employees facing lay-off.

Statutory guarantee pay and lay off—an explanation

In practice, lay-off is where you ask an employee to stay at home and not attend work.

A period of lay-off will only be classed as statutory lay-off where staff haven’t received pay for a week.

That’s normally as their employer doesn’t provide them with work. And where their pay depends on carrying out work.

Statutory lay-off will only take effect where the employee is available for work during the period away from the business.

For example, sickness isn’t a period of lay-off. That’s because the employee wasn’t available for work during this time. Additionally, the employee can’t:

  • Turn down available work.
  • Frustrate your attempts at offering available work, in the hope they can have lay-off.

It’s important to have a lay-off clause in a contract. With that, it allows you to dictate that the company reserves the right to take this action—if necessary.

Without such a clause, staff will need to receive pay in full during the lay-off.

Lay-off pay guidelines

If there’s a specific clause permitting lay-off without pay within a contract, you don’t need to pay laid-off staff their usual rate.

However, if staff have worked for the company for at least a month, they’ll have the entitlement to statutory guarantee pay.

The amount of SGP payable to employees is subject to a daily cap. That’s set by the government every April. Over the last few years, this was as follows—including the current amount:

  • Statutory guarantee pay in 2018 was at £28.
  • In 2019 it was £29.
  • In 2020 it’s now £30.

So, the lay-off rate employees receive is a maximum of £30 a day—for five days in a three-month period. That’s a total of £145.

Statutory guarantee pay provisions

As well as the daily cap, the payment of guarantee pay is limited to a maximum of five days of SGP paid within any rolling three-month period.

So, for each workless day your requirement is to assess whether the employee has been paid the maximum of five days of SGP within the previous three months.

An employee’s entitlement to statutory guarantee pay does not affect any contractual entitlement to receive full pay, or varied pay, during 'workless days'.

Any payment of SGP made to the employee can be offset against their contractual pay owed.

And, in the alternative, any payment of contractual pay made to the employee can be offset against the entitlement to SGP.

But is statutory guarantee pay taxable? Yes, SGP is taxable. There’s no statutory exemption as SGP is a minimum pay rule for employment law. But it’s still taxable as pay in the absence of a legislative exemption.

Statutory guarantee pay during coronavirus

As a result of the ongoing coronavirus pandemic, you may find yourself placing staff on lay-off.

If so, you’re likely wondering how much SGP there is due to coronavirus. Ultimately, normal rules apply for staff placed on lay-off regardless of the reason, including if it’s a result of coronavirus.  

However, before laying staff off, you should consider whether you could make use of the Job Retention Scheme, which offers more flexibility.

The Scheme is set to be in place until the end of October.

Using this, you can make a furlough claim for your employees. This will, if they’re eligible, place them on 80% of their normal monthly wage.

This provides your business with a financial lifeline, as you can temporarily place staff on leave. Without having to worry about making redundancies or lay-offs.  

We’re here to help

If you’re considering the best approach to take with a return to work right now, then get in contact. We’re here to help: 0800 028 2420.

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