Lay-off and statutory guarantee pay: An employer’s guide

Being ‘laid-off’ is often used interchangably with being made redundant or getting fired. However, in employment law terms, the term lay-off has its own specific meaning.

What does lay-off mean in legal terms?

The legal concept of ‘lay-off’ refers to a situation where the employer asks an employee not to come to work for a period of time – either because the business is suffering, or for another reason that has affected the normal working of that business (for example, poor weather).

Employees can only generally be ‘laid-off’ if the employer has included a right to lay-off in the contract of employment. If they have, and circumstances arise where the employer needs to lay-off staff for a period, then they’re able to use this clause.

What is statutory guarantee pay during a lay-off?

There is a calculation set out in law for working out guarantee pay – it involves multiplying the number of normal working hours on a lay-off day by the guaranteed hourly rate (the amount of one week’s pay divided by the number of normal working hours in a week for that employee). Statutory guarantee pay is capped at £39 per day – this low cap will be hit by most employees.

The maximum an employee can get is £39 a day for 5 days in any 3-month period.

What are the limits of lay-off?

Statutory guarantee pay is low. Paying it in anything other than short-term emergency situations is likely to damage employee relations. For this reason, lay-offs should be used as an emergency solution in cases of real need by the employer.

If lay-off continues for a prolonged period, then employers run the risk of employees resigning and claiming redundancy pay. An employee with 2 years’ service can apply for redundancy and claim redundancy pay if they’ve been laid off for a period of:

• 4 or more consecutive weeks
• 6 or more weeks in any 13-week period

To claim redundancy, an employee would need to write to you within 4 weeks of the last day of the layoff. You will then have a period of 7 days to either accept the employee’s redundancy claim or give them a written counter-notice. If you fail to provide the employee with a counter-notice, you can be treated as having accepted their claim.

A counter-notice means that you expect work will soon be available, although this work must commence within 4 weeks and last at least 13 weeks.

Top tips for employers

• Think carefully about whether lay-off is the right option in any given circumstance. Even a short period of lay-off can damage employee morale and business reputation. Consider whether alternative options – for example, asking employees to take holiday or offering alternative work. It might be a better solution for both of you.
• Keep accurate records of the dates when lay-off is in play – including the 4 weeks after which a redundancy payment can be claimed and the 7-day deadline for issuing a counter-notice.
• Check your contracts of employment. If you work in an industry which is impacted by short-term closures (for example, those who work outdoors or in weather dependent industries) then consider adding a lay-off clause if you don’t already have one.