Guide

Redundancy: the options

Redundancy and lay-offs

You can lay-off an employee when you temporarily cannot give them paid work.

You must expressly agree it with them. This could be set out in:

  • their contract of employment
  • a national agreement for the industry
  • a collective agreement between you and a recognised trade union

National and collective agreements can only be enforced if they are incorporated into the employee's contract of employment.

You may also be able to lay off an employee:

  • Where you have clear evidence that shows that laying off employees has been a widely accepted practice in your organisation over a long period of time.
  • If you agree with the employee to change their employment contract to allow them to be laid off. This change will not necessarily give you the power to lay off the employee without pay and without their consent in the future.

Where there is no formal agreement in place and the employee refuses to agree to being laid off, you may have to consider other options which could include terminating the employee's original contract and offering them a new, revised one.

Terminating the contract would only be one of the options which the employer should consider.

This involves dismissing the employee and could lead to a claim of unfair dismissal.

See how to change an employee's terms of employment.

Wrongful lay-offs

You will be in breach of contract if you lay off an employee without pay if there is no contractual agreement or the employee has not agreed to it.

The employee may:

  • choose to accept the breach of contract and treat the contract as continuing, while claiming a guarantee payment
  • sue for damages for breach of contract in a civil court or, in certain circumstances, at an industrial tribunal
  • bring a claim of unlawful deduction of wages before an industrial tribunal
  • claim that your action amounted to a dismissal which could lead to a claim of unfair dismissal and/or for a statutory redundancy payment (SRP)

Statutory guarantee payments (SGP) and lay-offs

Eligible employees are entitled to a statutory guarantee payment if you don't provide them with a full day's work during the time they would normally be required to work. The maximum payment is five days in any three months.

For more information, see guarantee pay - entitlement, calculation and exemptions.

Statutory redundancy payments (SRP) and lay-offs

Employees can claim an SRP if the lay-off runs for:

  • four consecutive weeks or longer
  • any six weeks (with not more than three of the weeks being consecutive) in a 13-week period

The employee must give you written notice in advance that they intend to make a claim for an SRP.

Read LRA guidance on temporary lay-off and short-time working.