Letting employees go is never easy.
Sometimes, you might not have enough work to justify keeping everyone on payroll. So, laying off workers to cut costs might be the only way to keep your business running.
It’s not the same as dismissals or redundancy. It can’t be based on the employee’s conduct, performance, or capability. But there are still layoff rules – with compensation risks to follow if badly managed.
In this guide, we’ll look at why layoffs happen; how to action them, and what legal rules are needed to lay someone off.
What does ‘laid off’ mean?
A layoff is when an employer is unable to provide work and decides to reduce the workforce.
Layoffs happen when you need to manage costs or deal with economic reasons beyond your control.
Laying off employees (in small businesses and large corporations) is a common method used. Employing workers can cost a lot within a business. Wages, benefits, even compensation – they all add up.
Layoffs can help cut save costs, which is vital for businesses with financial difficulties.
Short time working vs temporary layoffs
If an employee receives a layoff notice, it means they’re considered temporarily not given any work to do. The worker should remain available for work during their normal hours as they can be called when needed.
In some cases, you might decide on short-time work for some workers. Here, instead of lay off, you can allow your staff to continue working on reduced hours.
Can a company lay you off without notice?
You can only legally lay off an employee if their contract includes a layoff clause.
There isn’t a legally outlined timeframe for a lay off period. But if it’s for a longer time, employees might apply for redundancy and claim pay benefits. This can only happen if the layoff period is:
- For 4 continuous weeks.
- For 6 weeks in a 13-week period.
The maximum days allowed for layoff is 45 days. Within these days, they are entitled to 50% of their wages and other legal entitlements.
Do you pay employees who have been laid off?
You should provide employees with full pay – for every work hour they have completed. If there isn’t any work for your employees to do, they might be eligible for layoff guarantee pay.
The maximum guarantee pay they can receive is £150. This is worked out as £30 a day for 5 days in any 3-month period.
If an employee earns less than £30 a day, they should receive their normal daily rate. You shouldn’t provide anything less than statutory layoff rate.
Eligibility for layoff pay
For statutory layoff pay, staff must:
- Be employed for one continuous month.
- They should be ready to work, within reasonability.
- Not refuse alternative employment (including work not outlined in contracts).
- Not be laid off work for industrial action.
Lay off without pay is classed as an unlawful deduction of wages. They could raise this claim to the employment tribunal. Which can lead to expensive pay-outs and business disruptions.
How do you choose employees for layoffs?
Making a layoffs can be difficult for both you and your staff. It can impacts on your business output and profits.
You need to think carefully when deciding on layoffs – especially when selecting employees. Without legal caution, you could face claims of discrimination and unfair dismissal. So, take care not to breach contract terms or legal obligations.
Some common forms of selection can include:
- Seniority-based layoffs: The last employee to get hired is the first to be laid off.
- Employee status-based layoffs: Those on part-time or temporary contracts are the first to be laid off.
- Performance-based layoffs: Employees who rank lower on workplace merit, achievement, or performance are the first to be laid off.
- Capability-based layoffs: Employees who lack training, skills, or experience are the first to be laid off.
- Multiple criteria layoffs: This can include a combination of reasons for deciding on layoff.
When deciding on multiple criteria layoffs, you could consider an employee’s attitude, ability, experience, and quality of work.
How to lay off multiple employees
A way to action layoffs is to have a strategic business approach. This means examining what your business needs to succeed – today, and in the future.
Whether it’s for one or multiple employees, follow this method for the layoff procedure:
- Decide on which employees to keep and who to lay off.
- Ask your HR or legal department about the best lay off method.
- Keep open communication about the layoff.
- Schedule individual appointments for those selected.
- Provide them written information for rights to benefits and support
Providing a lay off letter
Deciding on what to say when laying someone off is very important. You should keep professional manner; but also have empathy too, when laying people off.
You must provide employees with written confirmation, via a temporary layoff letter. The letter should include information like:
- The employee’s name, payroll number, position, and department.
- Details of the manager dealing with the layoff.
- Information on benefits, and compensation entitlements.
- Any other legal agreements which the employee signed to, like non-disclosure agreements.
Are there alternatives to layoffs?
Layoffs are standard business practice and can help you meet financial targets. But there are alternative methods to layoffs.
Applying for redundancy
In some situations, employees might choose to apply for redundancy instead of layoff. Employees can claim redundancy pay if:
- They’ve been let go without wages.
- They’re given short-time work and received less than half a week’s pay.
The short-time work must be for four or more weeks continuously. Or for six or more weeks in a 13-week period.
When applying for redundancy, they need to provide a redundancy claim within four weeks of their last layoff day.
You need to:
- Accept the claim in seven days; or give a counter-notice for the claim. (A counter-notice means you’ve rejected their request and expect work to soon be available).
- Provide working hours within four weeks; and it must last at least 13 weeks.
If you don’t provide a counter-notice, it means you’ve accepted the redundancy claim.
Employees can only receive redundancy pay after resigning. They have three weeks to hand in their notice, starting from:
- Seven days after giving a written notice (if you didn’t provide a counter-notice).
- The date you withdrew your counter-notice.
Learn how to follow the correct procedure when laying off employees
Laying off employees might prove to be the deciding financial factor for your business. You need to stick to a legal process when actioning layoffs.
Failing this and you could face compensation payments and court hearings—which creates repercussion to your business productivity and reputation.
Peninsula provides expert advice on short- time working and temporary layoffs. We can walk you through contract terminations and help you apply the best method for your individual situation.
Contact us for guidance on any HR or employment law issues. Or request a call back for a time that suits you.
Get in touch for immediate assistance. Call 0800 028 2420