Laying off staff due to coronavirus | What employers need to know
As the government attempts to slow the spread of coronavirus, businesses across all sectors will be forced to make some tough decisions regarding their workforce. In some cases, this means confronting the difficult prospect of laying off staff.
While some businesses are hoping to endure this turbulent period by reverting to homeworking, for others, this simply isn’t possible. In the hospitality industry, for example, there’s no scope for staff to work remotely, and with the government advising the public to avoid bars and restaurants, there may simply be no work for staff to do. Independent retailers may find themselves in a similar boat, as despite large supermarkets experiencing an apocalyptic surge in sales, the government’s advice to avoid all but essential shopping is likely to hit smaller businesses hard. Elsewhere, those in the travel industry, and those whose roles require close contact with the public, will also be left at a loose end due to travel restrictions and ‘social distancing’ measures.
What does it mean to lay off staff?
A lay-off is a situation in which an employer suspends a person’s employment and pay for at least one working day. Lay-offs are typically made in response to a temporary downturn in business and are used as a means of cutting costs during this period. As such, they usually have nothing to do with an employee’s personal performance and tend to involve whole groups of employees.
In periods of uncertainty – when employers cannot predict what business will be like from one week to the next – lay-offs can be used as an alternative to redundancy. The difference here is temporary lay-offs allow workers to remain employed so that they can return their role at a later date should circumstances improve.
During the coronavirus outbreak, therefore, employers may consider lay-offs as a way of preserving their business until the crisis subsides.
When are lay-offs permissible?
While it may seem difficult to convince staff to agree to lay-offs, they may be more receptive to this course of action if they understand that this is a temporary measure in response to the current outbreak and a means of avoiding redundancy.
If you are able to predict when normal working will resume, specifying that length of time staff will be laid off for may also encourage agreement and help to allay anxiety.
How much pay are staff entitled to if laid off?
The pay staff are entitled to if laid off will depend on what’s stated in their contract. Employees will be entitled to normal pay, unless their contract allows you to pay them less or nothing at all.
But I don’t have to pay staff during lay-offs if their contract allows for this?
Not necessarily. Even if your contracts state that you can lay employees off without pay, those with one month’s service or more may be entitled to ‘guarantee pay’. This is set at a maximum of £29 per day for five days in any three-month period, so affected employees can expect to receive a maximum of £145. Those who earn less than £29 per day will be entitled to their normal day rate instead, while guarantee pay for part-time workers will be worked out proportionally.
You may operate your own more generous guarantee pay scheme, in which case this will apply instead of (not on top of) statutory guarantee pay.
What about zero-hour workers?
Generally speaking, zero-hour employees will not have the right to receive work during a downturn. This will not be a lay-off, though, as they have no contractual right to work.
How long can a period of lay-off last?
There is no upper limit for how long staff can be laid off. However, if you lay staff off for longer than their contract allows, this may constitute a breach of contract.
If lay-off lasts for four consecutive weeks, or six weeks within a 13-week period, employees are entitled to serve notice to terminate their employment and may be able to claim a redundancy payment.
Should this happen, you will have seven days to either:
- Accept the employee’s claim; or
- If you expect work to be available within four weeks and last at least 13 weeks, issue a written counter-notice.
If the employee does not withdraw their claim at this stage, the matter will be referred to an Employment Tribunal, which will decide whether there is a reasonable prospect that work will resume.
What are the alternatives?
If coronavirus is causing unexpected financial strain, it’s understandable that you may consider scaling back your workforce.
However, there are other ways that you may be able to cut costs for a short period of time to allow your business to bounce back, including:
- Implementing a recruitment freeze;
- Considering short-time working;
- Offering voluntary retirement;
- Withdrawing non-contractual bonuses; and
- Reviewing your benefits package.
What are the dangers?
If there’s no lay-off clause in your contracts, but you lay staff off anyway, that will constitute a breach of contract. This will allow employees to make claims for unlawful deductions from wages and, if they have over two years’ service, they will be able to resign and claim constructive dismissal.
Similarly, if you don’t pay the amount stated in the employee’s contract, claims for deductions from wages and constructive dismissal could follow.
One particular danger relates to the way in which you select employees to be laid off or put on short-time working. You must make sure that the method you use:
- Has some objective grounds to it;
- Is not be discriminatory; and
- Is not used in a way that breaches trust and confidence.
Again, failure to do so could give rise to constructive dismissal claims.
Safeguard your workforce with our Employment Law support
The employment implications of coronavirus are far reaching, from managing sickness absence and the practicalities of homeworking to the potential for lay-offs and redundancies. With the situation constantly evolving, Ellis Whittam can provide essential Employment Law support to help ensure the stability of your team through this difficult period and beyond.