Lay Off Pay: Guide for UK Employers

“Lay off pay” is a term commonly used by employers when work dries up and difficult short-term decisions need to be made about staffing costs. However, in UK employment law, the phrase is frequently misunderstood and misapplied. There is no general legal right to ongoing “lay off pay”, and employers who rely on informal assumptions often expose themselves to unlawful deduction of wages claims, breach of contract disputes, or unintended redundancy liabilities.

For HR professionals and business owners, the challenge is not simply understanding whether lay off pay exists, but identifying precisely when payment is legally required, how much must be paid, and what decisions must be taken to remain compliant while protecting the business. The consequences of getting this wrong can include tribunal claims, backdated pay, redundancy costs, workforce relations damage and reputational risk.

What this article is about
This article provides a compliance-grade employer guide to lay off pay under UK employment law. It explains what the law actually requires, how statutory guarantee pay operates, when redundancy rights may be triggered, and the key decision points employers must manage when considering lay offs or short-time working. It is written for employers who need defensible, legally accurate decisions rather than surface-level guidance.

Section A: What do employers mean by “lay off pay” — and what does the law actually require?

Employers often use the phrase “lay off pay” as shorthand for any payment made to employees during periods when there is no work available. In practice, this can refer to very different legal concepts, each with distinct consequences. Understanding what the law does, and does not, recognise is the starting point for lawful decision-making.

A1. Is “lay off pay” a legal concept in UK employment law?

There is no standalone legal concept called “lay off pay” in UK employment law. The phrase does not appear in statute and it does not create an automatic entitlement for employees. In most cases, when employers or employees refer to “lay off pay”, they are referring to a limited statutory entitlement called statutory guarantee pay, together with any separate rights that may arise under the employment contract or a collective agreement.

For compliance purposes, it is important to be clear: statutory guarantee pay is the only statutory payment mechanism that applies to employees who are laid off or put on short-time working due to a shortage of work. Any other payments during a lay off period are driven by contract, collective arrangements, or employer discretion, not by a general statutory right.

This distinction matters. Employers who assume that “lay off pay” is a general obligation risk either paying more than the law requires, or failing to pay what the law mandates. Either route can create avoidable exposure, whether through unnecessary cost, wage disputes, or tribunal claims.

Statutory guarantee pay exists to provide a minimal safety net for employees who are willing and able to work but are temporarily not provided with work by their employer. It is not designed to replace normal earnings, nor to provide long-term income protection during downturns.

From a legal perspective, the correct question is not “Do we have to pay lay off pay?”, but:

• Is statutory guarantee pay triggered for this employee on these days?
• Does the employment contract or any incorporated agreement create any additional pay obligation?

A2. What is the difference between lay off pay and statutory guarantee pay?

Statutory guarantee pay is the minimum amount an employer must pay, by law, when certain conditions are met. It is capped at a daily rate set by the government, limited to five days in any rolling three-month period, and payable only where an eligible employee is given no work on a day they would normally be required to work.

By contrast, what employers often refer to as “lay off pay” may include full pay during a lay off period, reduced contractual pay, enhanced internal guarantee pay schemes, or discretionary payments made to support workforce retention. Those payments only arise where there is a contractual basis for them, where a collective agreement applies and is incorporated, or where the employer chooses to offer support beyond the statutory minimum.

For employers, failing to separate these concepts can lead to two common compliance failures: assuming no payment is due when statutory guarantee pay applies, or believing payment is capped when contractual obligations actually extend further.

A3. When does “lay off pay” arise in practice?

In practice, questions about lay off pay usually arise in two scenarios: lay offs, where employees are temporarily provided with no work at all, and short-time working, where employees are given some work but their pay is reduced to less than half of a normal week’s earnings because of a shortage of work.

Both situations can trigger statutory guarantee pay where the statutory conditions are met. Both can also create redundancy exposure if they persist beyond defined statutory thresholds, although redundancy in this context is not automatic and is usually driven by an employee taking formal steps to pursue a redundancy payment. Critically, neither situation automatically allows an employer to withhold pay unless the employment contract permits it or the employee has agreed to a variation.

From a risk perspective, lay off pay is rarely just about payroll. It sits at the intersection of wage protection law, contract law, redundancy rights, and unfair dismissal risk. Employers who treat it as a purely operational or short-term cashflow issue often discover too late that the legal consequences extend further.

Section A summary
“Lay off pay” is informal terminology and does not create a statutory entitlement by itself. UK employment law instead provides a narrowly defined right to statutory guarantee pay, supplemented only where contracts or incorporated agreements create additional obligations. Employers should distinguish carefully between statutory minimum payments and contractual pay rights, as confusion at this stage commonly leads to unlawful deductions, redundancy exposure, and avoidable disputes.

Section B: When are employers legally required to pay lay off pay?

For employers, the critical compliance question is not whether lay offs are commercially justified, but when the law actually requires payment. UK employment law does not impose a general obligation to pay employees during periods of no work. Instead, payment obligations arise only where specific statutory conditions are met or where contractual rights apply. Understanding these triggers is essential to avoiding unlawful deduction of wages claims and unexpected cost exposure.

B1. When is an employee entitled to statutory guarantee pay?

An employer is legally required to pay statutory guarantee pay when all of the following conditions are satisfied:

• The individual is an employee working under a contract of employment
• The employee has been employed continuously for at least one month
• The employee is available and willing to work
• The employer fails to provide the employee with a full day’s work on a day they would normally be required to work
• The failure to provide work is due to a shortage of work, not the employee’s conduct or choice

Statutory guarantee pay is triggered only on days where no work at all is provided. If an employee performs any work during the day, even minimal work, the statutory entitlement for that day does not arise. This distinction is often overlooked in practice and can lead to incorrect payroll assumptions.

Availability for work is a legal requirement, not a formality. For statutory guarantee pay to be payable, the employee must be genuinely and practically available to do the work if offered. Employers should be careful where employees seek to take other work during a lay off period, or impose conditions that would prevent them from returning to work when required, as this can affect entitlement and can also create wider contractual and operational issues.

From a compliance perspective, employers should ensure that managers understand that guarantee pay is assessed day by day, not by reference to weeks or pay periods. Informal arrangements, such as asking an employee to “check emails” or attend brief meetings, may remove the statutory entitlement for that day but can create inconsistency and dispute risk if not handled clearly and consistently.

B2. Who qualifies for lay off pay?

Not all individuals engaged by a business qualify for statutory guarantee pay. The entitlement is restricted to employees and does not extend to workers, agency staff, consultants, or the self-employed.

To qualify, an employee must have at least one month’s continuous employment, be genuinely available for work, and not have refused any reasonable alternative work offered by the employer. If an employee unreasonably refuses suitable alternative work, entitlement can be lost. Employers should be cautious about treating alternative work as “reasonable” where it materially changes the role, location, or working pattern, as that can itself become a dispute point if handled poorly.

Employees are excluded from entitlement where the lay off is due to industrial action involving employees of the employer or an associated employer. This exclusion is narrow but important in sectors where industrial disputes are more common.

B3. When is lay off pay not owed?

There are several situations where employers are not legally required to pay statutory guarantee pay, even where work is reduced or disrupted. No statutory guarantee pay is owed where:

• The employee performs any work during the day
• The employee has less than one month’s continuous service
• The employee is not genuinely available for work
• The employee unreasonably refuses suitable alternative work
• The lay off arises because of industrial action
• The employee has already reached the statutory maximum number of guarantee pay days within the relevant rolling three-month period

Where an employment contract expressly permits unpaid lay offs or reduced pay during periods of no work, statutory guarantee pay still applies, but only to the statutory minimum level. Employers cannot contract out of statutory guarantee pay. A common compliance mistake is assuming that a contractual lay off clause removes all pay obligations. In reality, the statutory minimum still applies, and failure to pay it can result in unlawful deduction of wages claims before an employment tribunal.

Section B summary
Employers are legally required to pay lay off pay only in limited and clearly defined circumstances. Statutory guarantee pay applies where eligible employees are ready and willing to work but are given no work at all on a normal working day. It does not apply automatically, it does not cover partial work days, and it is subject to strict statutory limits. Employers who misjudge eligibility or overlook statutory triggers risk wage claims and compliance failures, even where lay offs are contractually permitted.

Section C: How much is lay off pay — and how long must it be paid for?

Once statutory guarantee pay is triggered, employers must understand exactly how much must be paid and how long the obligation lasts. This is a tightly controlled statutory entitlement, designed to limit employer exposure while providing a basic level of income protection for employees. Misunderstanding the limits of this obligation is a frequent cause of both overpayment and unlawful deductions.

C1. How much is statutory lay off pay?

Statutory lay off pay, more accurately referred to as statutory guarantee pay, is capped at a fixed daily rate set by the government and reviewed annually. At the time of writing, the statutory rate is £38 per qualifying day, payable only for days on which the employee is given no work at all.

An eligible employee may receive statutory guarantee pay for up to five workless days within any rolling three-month period. This means the maximum statutory liability is £190 in any three-month window, regardless of how long the lay off continues beyond that point.

Where an employee’s normal daily pay is less than the statutory rate, the employer is required to pay the employee’s normal daily earnings instead. For part-time employees, the statutory amount is pro-rated in line with their usual working pattern.

From a payroll and compliance perspective, employers should ensure that guarantee pay days are tracked accurately, the rolling three-month period is applied correctly, and part-time calculations reflect contractual hours. Errors in calculation or record-keeping can result in underpayment and subsequent tribunal claims.

C2. How long must lay off pay be paid for?

Statutory guarantee pay is strictly time-limited. Once an employee has received payment for five qualifying days in a three-month period, there is no further statutory obligation to make guarantee payments during that period, even if the lay off continues.

However, the end of statutory guarantee pay does not mean the end of legal risk. Prolonged lay offs can still trigger redundancy rights, increase the risk of constructive dismissal claims, and damage workforce relations. Employers should avoid treating the five-day limit as a safe harbour. While statutory pay obligations may fall away, contractual, redundancy and dismissal risks continue to escalate the longer the lay off persists.

C3. Can employers pay less than the statutory minimum?

Employers cannot lawfully pay less than statutory guarantee pay where an employee is entitled to it. Any attempt to do so is likely to amount to an unlawful deduction of wages, exposing the employer to tribunal claims and backdated payment orders.

Even where an employment contract includes a clause allowing unpaid lay offs or reduced pay, statutory guarantee pay must still be paid to eligible employees. Contractual terms cannot override statutory minimum rights.

Employers should also be cautious where they operate internal guarantee pay schemes. These schemes must meet or exceed the statutory minimum. A scheme that pays less than the statutory entitlement will not displace the statutory obligation and may create additional compliance exposure.

C4. Can employers pay more than the statutory minimum?

Employers are free to pay more than statutory guarantee pay if they choose to do so. This may arise through express contractual terms, collective agreements, or discretionary arrangements designed to support employee retention.

However, enhanced payments carry legal risk if not carefully structured. Regular or repeated discretionary payments can, over time, become implied contractual terms, limiting future flexibility. Employers should ensure that any enhanced lay off pay is clearly documented, expressly stated to be discretionary where appropriate, and reviewed regularly for consistency.

Section C summary
Statutory lay off pay is deliberately limited in both amount and duration. Employers are required to pay no more than the statutory daily rate for a maximum of five days in any rolling three-month period, unless contractual arrangements impose greater obligations. While statutory liability is capped, redundancy, dismissal and contractual risks are not. Lay off pay should therefore be managed as part of a wider compliance and workforce risk strategy, not as a standalone payroll issue.

Section D: Do employers need employee consent to lay off staff without pay?

For many employers, the most significant legal risk associated with lay offs is not the payment of statutory guarantee pay, but whether the employer is entitled to lay off staff at all without continuing to pay their normal wages. Lay offs without pay are not automatically lawful and, in many cases, require clear contractual authority or employee agreement. Getting this wrong can lead directly to breach of contract claims and constructive dismissal allegations.

D1. When is lay off without pay lawful?

An employer may lawfully lay off employees without paying their normal wages only where there is a clear legal basis for doing so. This will usually arise in one of the following situations:

• The employment contract contains an express clause permitting lay offs or short-time working without full pay
• A national agreement applicable to the industry allows for lay offs and is incorporated into the contract
• A collective agreement with a recognised trade union permits lay offs and is expressly incorporated into the employment contract
• There is a well-established and clearly evidenced custom and practice within the workplace
• The employer and employee have agreed a contractual variation permitting lay off without pay

In the absence of one of these bases, withholding normal pay during a lay off is likely to amount to a breach of contract, even where the business is facing genuine financial difficulty. Commercial pressure or cashflow constraints alone do not justify unpaid lay offs.

D2. Can employers rely on custom and practice?

Reliance on custom and practice is legally possible but carries a high evidential threshold. To be enforceable, the practice must be longstanding, consistent, well known to employees, and accepted without objection over time.

In practice, few employers can meet this threshold. Arrangements introduced during exceptional periods, such as economic shocks or public health emergencies, are unlikely to establish a binding implied contractual term. Employers who rely on custom and practice without clear and compelling evidence often find themselves unable to defend breach of contract claims.

Where there is any doubt, employers should seek express agreement from employees to a temporary contractual variation, rather than assuming a right to lay off without pay exists.

D3. What happens if an employer lays off staff without authority?

If an employer lays off staff without contractual authority or agreement, several legal risks arise immediately. Employees may be entitled to claim unlawful deduction of wages for unpaid salary, resign and claim constructive dismissal, and pursue claims for breach of contract.

Even where employees remain in employment, failure to pay contractual wages can significantly damage trust and confidence, increasing the likelihood of disputes and attrition once work resumes. From a reputational perspective, poorly handled lay offs can also attract negative attention, particularly in smaller sectors or local labour markets.

D4. Does consent have to be permanent?

Where employers agree changes with employees to permit lay offs or reduced pay, it is important to distinguish between temporary and permanent contractual changes.

A temporary variation should be clearly defined in scope and duration, confirmed in writing, and specify when normal contractual terms will resume. A permanent change must be confirmed in writing within one month, in line with statutory requirements to notify employees of changes to their written statement of employment particulars.

Ambiguity should be avoided. Unclear arrangements may later be interpreted against the employer, particularly where disputes arise over pay or redundancy rights.

Section D summary
Employers do not have an automatic right to lay off staff without pay. Lawful unpaid lay offs depend on clear contractual authority, incorporated collective agreements, or employee consent. Reliance on custom and practice carries significant evidential risk, and unilateral action is likely to result in breach of contract and wage claims. Consent, documentation, and clarity are critical compliance steps, not administrative formalities.

Section E: How long can an employer lay off staff before redundancy rights arise?

UK employment law does not impose a fixed maximum duration for lay offs. However, the absence of a formal time limit should not be mistaken for legal certainty. The longer a lay off continues, the greater the legal exposure for the employer, primarily because employees may acquire statutory rights to pursue redundancy pay even though their employment has not formally ended.

E1. Is there a legal limit on how long a lay off can last?

There is no statutory maximum period for which an employee may be laid off. In principle, a lay off can continue indefinitely, provided it is permitted by contract or agreement and handled lawfully.

That said, prolonged lay offs can undermine the implied term of trust and confidence, increase the likelihood of constructive dismissal claims, and trigger statutory redundancy rights. Employers should therefore treat lay offs as time-sensitive risk measures rather than open-ended solutions.

E2. When can an employee claim redundancy after a lay off or short-time working?

An employee may become entitled to claim statutory redundancy pay where they have been laid off or placed on short-time working in line with defined statutory thresholds. These thresholds are:

• Four or more consecutive weeks of lay off without pay, or
• Six or more weeks of lay off or short-time working within a 13-week period, provided no more than three of those weeks are consecutive

For short-time working, the statutory test is met where the employee receives less than half of a normal week’s pay. These rights arise only where the employee has at least two years’ continuous employment, which is the qualifying period for statutory redundancy pay.

It is important to emphasise that redundancy in this context is not automatic. The statutory framework gives the employee the option to pursue redundancy if they choose to do so. Employers should therefore be alert to the point at which this option becomes available, even if the business intends the lay off or short-time working arrangement to be temporary.

E3. How does the redundancy notice and counter-notice process work?

To initiate a redundancy claim, the employee must give the employer written notice stating their intention to claim redundancy pay. This notice must be given within four weeks of the last day of the relevant lay off or short-time working period.

Once notice is served, the employer has seven days to respond by either accepting the redundancy claim or issuing a written counter-notice. A counter-notice may be issued only where the employer reasonably expects that the employee will be able to return to normal working hours within four weeks, and that the work will last for at least 13 consecutive weeks.

If no counter-notice is served within the seven-day window, the employer is treated as having accepted the redundancy claim.

E4. What happens after a counter-notice is issued?

Where an employer issues a counter-notice but later realises that work will not, in fact, be available as expected, the counter-notice may be withdrawn. This must be done in writing. Once withdrawn, the employee’s redundancy entitlement revives.

If the employer neither provides work nor lawfully maintains the counter-notice position, the employee may proceed to resign and claim redundancy pay. To complete the process, the employee must resign within three weeks, starting from seven days after giving notice where no counter-notice was served, or from the date on which the counter-notice was withdrawn.

Section E summary
Although lay offs may lawfully continue for extended periods, they carry a built-in statutory exit route for employees. Once defined time thresholds are met, eligible employees can choose to pursue a redundancy outcome, even where the employer views the situation as temporary. Employers must monitor lay off duration carefully, respond promptly to redundancy notices, and assess realistically whether work will genuinely resume. Poor handling at this stage can convert a cost-saving measure into an avoidable redundancy liability.

Section F: What rights do employees retain during lay off periods?

A common misconception among employers is that lay offs suspend employment rights. In law, the opposite is true. A lay off does not terminate the employment relationship, and most statutory employment rights continue in full throughout the lay off period. Employers who treat lay offs as a legal “pause” risk underestimating their ongoing obligations and exposure.

F1. Does lay off affect employment status or continuity?

During a lay off, the employee remains employed. The contract of employment continues to exist, even where no work is being provided and pay is reduced or suspended in line with contractual terms.

Importantly, periods of lay off count towards continuous employment. This means that qualifying service for statutory rights continues to accrue, including eligibility for redundancy pay, unfair dismissal protection, and statutory notice entitlements.

Employers should not assume that time spent on lay off delays or freezes employment rights. In practice, extended lay offs often accelerate exposure to redundancy and unfair dismissal claims by allowing qualifying service thresholds to be met.

F2. Are employees protected from dismissal during lay off?

Employees remain protected by unfair dismissal law during lay off periods. An employer cannot lawfully dismiss an employee simply because they have been laid off, without establishing a potentially fair reason and following a fair procedure.

Where dismissal occurs during or following a lay off, employers must still be able to demonstrate a fair reason, such as redundancy, and that a reasonable process has been followed. Lay off does not remove the need for consultation, fair selection, or consideration of alternatives.

Failure to apply redundancy procedures on the basis that an employee was already laid off is a common and costly mistake.

F3. Do employees continue to accrue holiday and other statutory rights?

Statutory annual leave continues to accrue during lay off periods, as the employment relationship remains in place. This applies regardless of whether the employee is receiving statutory guarantee pay, contractual pay, or no pay at all.

Employers should note that contractual holiday entitlement in excess of the statutory minimum may be treated differently depending on the wording of the employment contract. While statutory holiday must continue to accrue, enhanced contractual holiday may be subject to contractual conditions.

Holiday pay calculations must continue to follow statutory rules, and accrued holiday may need to be paid on termination. Employers may require employees to take holiday during lay off periods, but only where statutory notice requirements are met.

Other statutory protections, including protection from discrimination and whistleblowing detriment, also continue to apply throughout lay off periods.

F4. Can employees work elsewhere during a lay off?

Employees may be able to take on additional work during a lay off period, but this is not an unrestricted right. The position depends on the terms of the employment contract and the requirement that the employee remains genuinely available for work with their primary employer.

Where a contract includes exclusivity clauses or restrictions on working for competitors, employees who breach those terms by taking alternative work may be in breach of contract. Even in the absence of express restrictions, working for a competitor may breach implied duties of fidelity and confidentiality.

Employees must also remain genuinely available to return to work when required. Where alternative work prevents this, entitlement to statutory guarantee pay may be lost, and disciplinary action may follow once the employee returns.

Employers should approach this issue proportionately. Overly rigid enforcement during lay offs can undermine employee relations and increase attrition risk once normal operations resume.

Section F summary
Lay offs do not suspend employment rights. Employees remain employed, continue to accrue service, and retain protection from unfair dismissal, discrimination and wage breaches. Employers must manage lay offs with the same legal care as active employment, ensuring statutory rights are respected and communication is clear. Treating lay offs as a temporary administrative measure, rather than an ongoing legal relationship, is a common and costly mistake.

Section G: What is short-time working — and how does it affect lay off pay?

Short-time working is often used by employers as a perceived lower-risk alternative to full lay offs. In practice, short-time working engages many of the same statutory protections and redundancy risks and can be more complex to administer correctly. Employers must understand how short-time working is defined in law and how it interacts with lay off pay obligations.

G1. What counts as short-time working under UK employment law?

Short-time working arises where an employee is provided with some work, but their pay is reduced to less than half of a normal week’s pay because of a shortage of work. The legal test focuses on pay rather than hours, although reduced hours are usually the mechanism by which short-time working is implemented.

This distinction is important. An employee may still attend work regularly, but if their weekly pay falls below half of their normal earnings, statutory short-time working protections may be triggered.

As with lay offs, short-time working does not terminate employment. The employee remains employed, and any reduction in hours or pay must be authorised by an express contractual clause, a collective or national agreement incorporated into the contract, or a lawful contractual variation agreed with the employee. Without such authority, reducing pay is likely to amount to a breach of contract and unlawful deduction of wages.

G2. Does statutory lay off pay apply during short-time working?

Statutory guarantee pay can apply during short-time working, but only in limited circumstances. Where an employee works some days but is given no work at all on a particular day they would normally be required to work, statutory guarantee pay may be payable for that day, provided the eligibility conditions are met.

Where an employee performs some work every day, even if paid at a reduced level, statutory guarantee pay will usually not be triggered. This creates a practical compliance challenge for employers operating variable schedules, as entitlement can fluctuate depending on how work is allocated.

Employers should ensure payroll systems are capable of identifying full workless days and distinguishing between lay off days and reduced-pay days. Errors in classification are a common source of wage disputes.

G3. How does short-time working trigger redundancy rights?

Short-time working carries the same redundancy trigger thresholds as lay offs. An employee may become entitled to claim statutory redundancy pay where they have been placed on short-time working for four or more consecutive weeks, or for six or more weeks within a 13-week period, provided no more than three of those weeks are consecutive.

As with lay offs, the employee must have at least two years’ continuous employment to qualify for statutory redundancy pay. Once the relevant threshold is met, the employee may choose to serve written notice of their intention to claim redundancy, triggering the same notice and counter-notice process.

Employers sometimes assume that short-time working is safer because some pay continues to be provided. In reality, the statutory framework treats prolonged short-time working as functionally equivalent to lay off for redundancy purposes.

G4. Why short-time working can increase compliance risk

Short-time working often increases legal risk rather than reducing it. Common issues include unclear contractual authority to reduce hours, inconsistent application across the workforce, payroll errors in calculating reduced pay and guarantee pay, and failure to monitor redundancy trigger periods.

Employees may also be less willing to tolerate prolonged short-time working than full lay off, particularly where earnings fluctuate unpredictably. This can accelerate resignations and redundancy claims, undermining the intended cost-saving benefits.

Section G summary
Short-time working is not a low-risk substitute for lay off. Where pay falls below half of a normal week’s earnings, statutory protections apply, including redundancy triggers that mirror those for lay offs. Statutory guarantee pay may still be owed on full workless days, and contractual authority is essential to avoid wage claims. Employers who underestimate the complexity of short-time working often face higher compliance risk, not lower.

FAQs: Lay Off Pay UK

This section addresses the most common questions employers ask about lay off pay, statutory guarantee pay, and related compliance risks. The answers are framed to support defensible employer decision-making rather than general guidance.

What is lay off pay in the UK?

“Lay off pay” is not a defined legal term under UK employment law and does not create an automatic entitlement for employees. In practice, the phrase is commonly used to describe payments made to employees during periods when no work is available. The only statutory payment that may be required is statutory guarantee pay, which applies in limited circumstances and is capped in both amount and duration. Any additional lay off pay depends entirely on the terms of the employment contract or any incorporated collective agreement.

Is lay off pay the same as statutory guarantee pay?

No. Statutory guarantee pay is a minimum legal entitlement set by statute. It is payable only where an eligible employee is given no work on a normal working day and is limited to five days in any rolling three-month period. Lay off pay, as used by employers, may also refer to contractual or discretionary payments that go beyond this statutory minimum, but these are not legally required unless agreed.

Can employers lay off staff without pay?

Employers can lay off staff without normal pay only where they have the legal authority to do so. This usually requires an express contractual clause, a collective or national agreement incorporated into the contract, or a lawful contractual variation agreed with the employee. Even where unpaid lay offs are permitted, eligible employees must still receive statutory guarantee pay. Without authority, unpaid lay offs are likely to amount to breach of contract and unlawful deduction of wages.

How much is statutory lay off pay?

Statutory guarantee pay is set at a daily rate determined by the government and reviewed annually. At the time of writing, the rate is £38 per qualifying day, payable for up to five days in any rolling three-month period. Where an employee normally earns less than the statutory rate, they are entitled to their normal daily pay instead. Part-time employees receive a pro-rated amount.

How long can an employee be laid off before redundancy rights arise?

There is no fixed legal limit on how long a lay off can last. However, an employee may become entitled to pursue statutory redundancy pay if they are laid off without pay for four consecutive weeks, or for six weeks within a 13-week period, provided no more than three of those weeks are consecutive. For short-time working, the same thresholds apply where pay falls below half of a normal week’s earnings. The employee must have at least two years’ continuous employment to qualify, and redundancy is not automatic but is initiated by the employee.

Does lay off pay affect holiday or continuity of service?

Lay off does not break continuity of employment. Employees continue to accrue continuous service, which counts towards redundancy pay, unfair dismissal protection, and statutory notice entitlements. Statutory holiday entitlement continues to accrue during lay off periods. Contractual holiday above the statutory minimum may be subject to different treatment depending on contract wording.

Can employees work elsewhere while on lay off?

Employees may be able to take other work during a lay off, but this depends on the terms of their employment contract. Restrictions on working for competitors or exclusivity clauses may apply. Employees must also remain genuinely available to return to work when required. If alternative work prevents this, entitlement to statutory guarantee pay may be lost and disciplinary issues may arise.

What are the main risks for employers when dealing with lay off pay?

The main risks include unlawful deduction of wages claims, breach of contract, constructive dismissal allegations, and unintended redundancy liabilities. Poor communication, inconsistent treatment, failure to track statutory thresholds, and incorrect payroll calculations frequently escalate what begins as a short-term cost-saving measure into a wider legal and reputational issue.

Conclusion

Lay off pay is often treated by employers as a narrow payroll issue, but under UK employment law it is a broader compliance and risk management issue that sits at the intersection of wage protection, contract law, and redundancy rights. There is no general statutory right to ongoing “lay off pay”. Instead, the law imposes a tightly limited obligation to pay statutory guarantee pay, supplemented only where contractual terms or incorporated collective agreements create additional rights.

For HR professionals and business owners, the key risks arise not from the concept of lay off itself, but from misunderstanding when statutory obligations are triggered, assuming contractual authority exists where it does not, and allowing lay offs or short-time working to continue without monitoring redundancy thresholds. While statutory guarantee pay is capped in both amount and duration, the wider legal exposure associated with prolonged lay offs is not.

A compliance-led approach requires careful contract review, accurate payroll administration, realistic assessment of whether work will resume, and clear communication with employees throughout the process. Employers who approach lay off pay as a temporary cost-saving measure without addressing these legal realities often find that short-term savings are outweighed by long-term financial and reputational consequences.

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