Redundancy and lay-offs
Contractual and statutory issues for laying off employees, including statutory guarantee and redundancy payments
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. See how to change an employee's terms of employment.
Where there is no formal agreement in place and the employee refuses to agree to be 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.
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 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: employee entitlement, calculation and exemptions.
Statutory redundancy payments (SRP) and lay-offs
Employees can claim a statutory redundancy payment if the lay-off runs for:
- four consecutive weeks or longer
- any six weeks (with not more than three of the weeks being consecutive, eg the six weeks cannot be made up of a four week and a two week period) in a 13-week period
The employee must give you written notice in advance that they intend to make a claim for an SRP. The claim may be contested by the employer if normal working is likely to be resumed within four weeks and there is a reasonable prospect of work for not less than 13 weeks, during which the employee would not be laid off.
There is a strict timetable of requirements, one of which is the resignation of the employee, whereby the employee may ultimately complain to an Industrial Tribunal if they consider that they are entitled to a redundancy payment and it remains unpaid.
The Labour Relations Agency (LRA) redundancy webinar provides useful information on the topic of redundancy and how to ensure the redundancy process is managed fairly and in line with employment legislation.