In response to the challenges presented by the pandemic, many businesses are being forced to reconsider their workforce needs and options. Full-time, permanent contracts may, in the current circumstances at least, no longer provide the level of flexibility employers need at this time to ensure their company’s survival.
Alternative solutions when engaging workers could include using part time contracts, zero-hours contracts, or looking at lay-offs and short time working. This guide provides an introduction to the last option – short time working – exploring what it is, when and why it might work for your business, and the legal pitfalls to avoid.
What is short time working?
Short time working is when you reduce the hours of some or all of your employees, or pay them less than half a week’s pay. This could be during periods of lower demand or a slowdown in consumer activity. The employees will be paid less because they work fewer hours, although how much they receive while they are not working, if anything, is at the discretion of the employer.
Not least because of the effect on the worker’s wages, it is important that you have considered other options that may be preferable to short time working. For example, you could offer periods of unpaid leave, ask employees to use some of their paid holiday entitlement, offer flexible hours and offer home working where appropriate. You might be surprised at how many employees take up offers like these.
Following the Chancellor’s confirmation that the CJRS would be ending on 31 October 2020, and with a phased withdrawal of the financial support for employers in the intervening period, those businesses claiming under the scheme will need to take action to unfurlough workers and consider the terms on which they will bring returning workers back to work.
Whatever the circumstances of considering short time working, there are several legal and practical factors to take into account.
Can you impose short time working on your employees?
You only have the right to impose short time working on your employees where there is existing provision within their contract of employment that you might do so in certain specified circumstances. You also have to state how your employees’ pay will be calculated during short time working. For example, you could pay them only for the hours they work, known as unpaid short time, or enhance their short time pay in some way.
If you cannot find such a provision in the relevant employees’ contracts then you should check to see if there is a national agreement in your industry that includes short time working, or a collective agreement between your particular workplace and a trade union.
If none of these apply, you will have to do one of the following:
- Meet with the affected employees (and/or their representatives) and explain why short time working is necessary and why you want to change their contracts to include it. You can seek to make a temporary or permanent change to their contracts. Your case may be strengthened if you explain that the result of their refusal to accept the changes may be compulsory redundancies.
- Rely on ‘custom and practice’. If your organisation has implemented short time working in the past with the implicit or explicit consent of your employees, then you could seek to argue that, by custom and practice, it is an established part of the terms and conditions of employment at your firm. However, it is quite difficult to win this argument legally and it would be better to formalise the arrangement by obtaining your employees’ agreement and inserting the correct provisions into employment contracts if you possibly can.
What does short time working mean for the employer and workers?
Depending on how short time working is implemented and managed, there could be a number of possible effects on your business:
Effects on the employer
- There will be an increase in administration in making the change to short-time working. If a change to employee contracts has to be negotiated in order for the employer to have the contractual right to impose short time working, this will impose considerable extra work on Human Resources and management.
- Morale in the organisation may be negatively affected if the process is not handled carefully.
- Businesses may gain some much-needed ‘breathing space’ during an economic downturn.
Effects on workers
- Pensions – in a contribution-based scheme, the amount of contribution the employee makes will reduce, so the overall pension pot will not grow as quickly as it would have done. In a final-salary scheme, the overall value of the pension benefit could go down, as the level of the salary earned by the employee during short time working will be less.
- Tax – as the employee will earn less during short time working, they may pay less tax and be entitled to claim a refund from HMRC.
- Holiday – workers continue to accrue holiday during short time working
- Pay – this is the most obvious negative effect for employees. As long as they meet the eligibility requirements, your employees will be entitled to statutory guarantee pay of £30 per day for up to five days in any three month period. Therefore, a maximum of £150. For part time employees, this will be pro rata.However, employees may only claim this for days on which they do no work at all for you and they must be earning less than half a normal week’s pay. In addition, they must make sure they are reasonably available for work, and have not refused an offer or reasonable alternative work from you.
- Statutory guarantee pay is the legal minimum that can be paid by employers. Of course, your organisation may choose to have its own guarantee pay scheme, in which case the employee is not entitled to the statutory payments on top.
- Benefits – employees may be able to claim Universal Credit or Working Tax Credit, or receive a higher level of this.
- Seeking other work – employees should check their contracts of employment to see if they are allowed to undertake work for other employers during a period of short time working. It is considered reasonable for employers to allow this. However, employees must make sure that they are able to return to work for the original employer when needed, otherwise they may reasonably be treated by the employer as having resigned from their job.
How is short time working different to lay-offs?
A lay-off is when your employees are off work for at least one working day, whereas short time working generally applies to a reduction in hours, but the employee still goes into work for part of the time. Lay-offs more often result in the employee being asked to stay at home for a period of time, or take a period of unpaid leave.
Legal risks for employers of adopting short time working
Unfortunately, there are a number of ways in which your business could mistakenly fall foul of the law in implementing short-time working. For example, if you have to select particular employees for short time working, then you must take care not to do so for potentially discriminatory or unfair reasons.
You should remember that even if if your selection itself was not done for discriminatory reasons, if the effect of your selection is discriminatory then those employees could still raise a grievance or worse. For example, if you select more part timers for short time working then this could be potentially discriminatory as part-time workers are more likely to be women.
If you impose short time working without obtaining the consent of your employees, you could face a raft of claims in the employment tribunal. These include unlawful deduction of wages, breach of contract, constructive unfair dismissal, notice pay and redundancy pay.
Indeed, a major risk of short time working or laying off employees is that you will Inadvertently give your employees the right to claim that they are redundant and owed redundancy pay by your organisation. There is no time limit on how long short time working or lay offs can last, subject to any relevant provision in the employee’s contract. However, the law states that if an employee has been laid off or on short time working and receiving less than half a week’s pay for either four or more weeks in a row, or six or more weeks in a thirteen week period, then they can claim redundancy.
There are strict time limits governing the employee’s claim for redundancy under this procedure. First, they have to write to you to claim redundancy within four weeks of the last day of the short time working period. The employer then has seven days either to accept the claim or serve a counter-notice stating that work is shortly to become available. The work must be available to the employee within four weeks, and last at least thirteen weeks in order for the redundancy payment not to be due to the employee.
If the employer does not serve a counter-notice, the employee must resign in order to trigger their entitlement to redundancy pay. Their resignation must be sent in within a three week period starting from seven days after they gave notice to their employer, or the date the employer withdrew its counter notice, if that was served.
Finally, employees who find other work to make up for the time they do not work for you, may end up resigning from your employment.
This may not be helpful for you if you wish to retain the experience of your workforce for when business picks up again.
DavidsonMorris’ employment lawyers can help with all aspects of employment contract changes. Working closely with our specialist HR colleagues we provide comprehensive guidance on how to approach and implement changes to terms and conditions projects to minimise legal risk while ensuring commercial goals are achieved and employee engagement is optimised. For help and advice, speak to our experts.
Short time working FAQs
What is the law on short time working?
The law states that you must have given your consent for your employer to put you on short time working. If there is already a provision in your contract of employment allowing your employer to do this then you will be deemed to have given your consent. However, if there is no such provision then your employer will have to obtain your consent, usually by varying your contract with your permission.
Can you put employees on short time?
Yes, but only if there is a provision in the employees’ contracts of employment allowing you to do so. If there is no such provision then you will have to seek the employees’ agreement to short time working. This might be collectively or individually. You can ask for the employees’ agreement to short time working for a defined period of time, or seek to change the employees’ contracts of employment so that you can introduce short time working when you like in the future.
How long can short time working last?
There is no time limit on how long short time working or lay offs can last. However, if it lasts for over a certain amount of time then an employee may be able to claim that they are redundant and therefore owed a redundancy payment by their employer. This will apply if they have been laid off or on short time working and earning less than half a week’s pay for either four weeks in a row, or six or more weeks in a thirteen week period.
What does unpaid short time mean?
Unpaid short time is where you are not paid at all by your employer for the hours that you do not work, but would usually have worked. This will result in a reduction in your usual pay. If you do not work at all for a day, you may be entitled to claim statutory guarantee pay. However, you should check your contract of employment to see if your employer is allowed to pay you less or not at all during short time working. If the contract does not say that the employer can pay you less then they must not do so.
Last updated: 9 June 2020