Many businesses are continuing to feel the impact of rising costs, ongoing legislative change and wider economic uncertainty. As a result, employers are increasingly looking at alternatives to redundancy that allow them to protect both their people and their business. We have seen a noticeable rise in enquiries around short time working, lay-offs and temporary pay reductions.
These measures can offer a practical short-term solution, helping organisations reduce costs while retaining valued employees and maintaining operational continuity.
However, this should not be seen as a quick fix. There are specific legal considerations and employee protections to be aware of, and these options should typically only be explored once all other avenues have been considered.
In this article, we will explain how this operates in practice, when it can be used, and how to implement it fairly and compliantly within your business.
What is Short Time Working?
This is a temporary arrangement where an employer reduces employees’ working hours and pay due to a downturn in work. This may also apply if your business premises have to close temporarily, for example due to flooding, fire or a power failure.
An employee is considered to be on short time work if they receive less than half of their normal weekly pay. In order to do this, there must be a clause in the contract to allow this. If you don’t have this in place, you must gain employees consent.
What are lay-offs?
Lay-offs are a temporary form of redundancy where an employees employment is suspended for a period of time. They will remain an employee but will be unpaid during this time. Similar to short time working, their should either be a clause in the contract or permission is required from the staff member.
A period of lay-off is only classed as a statutory lay-off if an employee receives no pay for a full week and is not provided with any work, where their pay depends on them carrying out that work.
For example, if an employee is paid an annual salary, their pay does not depend on work being provided. This means they cannot be placed on a statutory lay-off.
Guarantee Pay
If an employee is on short term working or laid off, there may be days when they do no work at all. In these situations, they may still be entitled to a minimum level of pay, known as statutory guarantee pay.
This applies only to days the employee would normally be expected to work.
When Can You Put Workers on Short Time Working or Temporary Lay-offs?
You can only put employees on short time working or temporary Lay-offs if they are an employee. This does not apply if they are a temporary worker.
As mentioned above, there must be a clause in the contract or you must get the employees permission before going ahead with this.
If a contractual change is agreed, you should give the employee at least one month’s notice and confirm the change in writing. This should include issuing a letter and providing an updated copy of their contract.
If this process is not followed, employees may be able to claim breach of contract and/or constructive dismissal on the basis that they have been treated unfairly.
How long can the employee be on short time working or temporary layoff?
If eligible, your employee can claim statutory redundancy pay if they have been temporary laid off or on short time working for four consecutive weeks or six weeks in a thirteen-week period.
How long this will last also depends on what was agreed in the employee contract.
Annual Leave entitlement
This is a temporary arrangement and you should consider the employee’s ongoing benefits and entitlements. This includes how annual leave is treated. Employees will continue to accrue holiday in the usual way during this period. If the situation becomes long-term or permanent, you will need to ensure any unused holiday is paid accordingly.
How to Implement Reduced Hours Fairly
It is important that this is implemented fairly and in line with UK employment law. This means:
- Communicating your plans early to give staff as much notice as possible.
- Consult with your employees, discuss the reasons for this decision, and look at possible alternatives.
- Keep it consistent
- Always confirm any changes in writing.
How The HR Booth Can Support
You may feel temporary lay-offs can be a practical way to manage costs, but it needs to be handled carefully to avoid legal risks and maintain trust with your team. That’s where we can support you.
At The HR Booth, we work closely with employers to ensure any changes to working hours are fair, compliant, and communicated effectively. We can:
- Review your contracts and policies to check whether short-time working can be implemented lawfully
- Guide you through the consultation process, helping you have clear, constructive conversations with your employees
- Prepare the necessary documentation, including letters, agreements, and variation of contract templates
- Advise on risks and best practice, ensuring you avoid issues such as unlawful deductions from wages or discrimination claims
- Support you with wider workforce planning, including other alternatives to redundancy
Most importantly, we take a practical, people-focused approach. Our aim is to help you make the right decision for your business while maintaining positive employee relations.
If you’re considering temporary lay-offs, short time working, or want to explore your options, contact us.
