What alternatives are there to redundancy? For responsible employers considering how to cut costs without making any employees redundant, then lay-offs and short-term working may be just what they are looking for.
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Lay-offs and short-time working are often considered by employers to be the same and are referred to as ‘LOST’. However, they are in fact, different concepts under the law, and it is important to know the difference between lay-offs and short-term working before taking action.
- A lay-off is when the employer asks an employee or group of employees to not attend for work for a temporary period.
- Short-time working is when an employer requires an employee or group of employees to work less than their contracted hours.
In practice, it may be that lay-off is a reactionary response to a work shortage, whereas short-time working could be seen to be more of a planned approach.
Either option gives the employer flexibility during times when work has fluctuated below the usual level, either due to demand or temporary closure.
The employer can save money by cutting labour costs – often the most significant cost to a business – but at the same time, enabling them to continue to employ its workforce.
The impact of LOST
From an employee’s perspective, LOST, although not ideal financially, will mean their continuity of employment is preserved as are any associated rights and benefits.
Any LOST period is not entirely without payment (other than for individuals with less than 1 month’s service). Statutory Guarantee Pay will be paid for any workless day. The daily payment is capped at £29 per day for a maximum of 5 days within any 3-month period.
Contracts and consent
There is a catch for the employer: Employees must give prior consent to either course of action because there will be a variation to their contract of employment. Simply having a clause in the contract allowing for terms to be varied by the employer is not sufficient in this instance. If an employer proceeds to use LOST without prior consent, they risk successful employment tribunal claim/s.
The best way to go about getting consent is to have an express LOST clause in the contract of employment. Where there is no such clause, the employer must consult with the workforce and ask them to agree, usually using the argument that it is better than the alternative of redundancy. This is particularly of relevance for any individuals who have less than 2 years of service and, therefore, would not be entitled to receive a redundancy payment.
So, in anticipation of the worsening economic climate, employers are advised to ensure any new contracts issued have a LOST clause incorporated (best advice would be to not employ anyone new unless it is absolutely business critical).
In addition, rather than waiting for the need to arise, employers can consult with their workforces over incorporating a LOST clause into the contract of employment in advance.
At MAD-HR our skilled and experienced team can support you in communicating and consult with your workforce and amending your contract template. We can also advise you on other alternative courses of action or, as a last resort, how to undertake an effective redundancy program, protecting the rights of employees, the reputation of the organisation and minimising the impact of those employees that remain. Contact us for more information and guidance.
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