What is lay off, and when can it be used? Costs continue to rise for businesses across the UK, with increases to statutory payments and upcoming changes to Statutory Sick Pay adding further pressure from April. As a result, many employers are being forced to make difficult decisions to protect the future of their organisation. While redundancy should always be a last resort, the reality is that businesses are having to explore alternative ways to manage costs and sustain operations.
One option that is coming up more frequently in conversations with employers is the use of temporary measures, including short-time working and lay-offs. Many businesses will remember using these approaches during the pandemic, before furlough was introduced, as a way to navigate periods of reduced demand.
In this article, we’ll explain what lay-offs are, how they can be applied in practice, and what employers need to consider to ensure they are implementing them fairly and in line with employment law.
What is lay off?
Lay-offs are a temporary measure where an employee’s work is paused for a period of time. They remain employed by the business but are not provided with work and, in most cases, will not receive pay during this period. Similar to short-time working, employers should only implement lay-offs where there is a contractual right to do so, or where the employee has agreed to it.
A lay-off is only considered a statutory lay-off where an employee receives no pay for a full week and is given no work, with their pay dependent on carrying out that work.
For example, employees who are paid an annual salary are not typically eligible for statutory lay-off, as their pay is not directly dependent on work being provided.
How long can you be laid off?
There are no specific time limits on how long you can be laid off. However, employees can claim for redundancy pay is it has been:
- 4 consecutive weeks
- 6 weeks in a 13-week period
What the law says
You can only introduce lay offs if the person is an employee. If they are a temporary worker, you are unable to go down this route.
There must also be a clause in their contract. Alternatively, you can get their permission to go ahead with this. If your employee does agree to this, you must give at least one month’s notice and confirm this change in writing. This must be included in a letter and provide an updated copy of their contract.
If you don’t follow the correct process, staff may be able to claim constructive dismissal and/or breach of contract due to being treated unfairly.
Statutory Guarantee Pay
If workers are currently laid off, they may have days where they don’t work at all. In this circumstance, they may be entitled to a small amount of pay such as statutory guarantee pay. This will be £41 per day for up to 5 days in any 3-month period from April 2026. This payment would only apply to days staff would normally work.
In order for employees to be entitled to this, they must:
- have been in continuous employment for one month
- Haven’t refused fair alternative work
- available for their normal working hours
- Not laid off due to industrial action
Employers must not neglect giving this payment to staff who are currently laid off as this can lead to unlawful deduction of wages.
What is the difference between short time working and lay-offs?
The key difference between short-time working and lay-offs comes down to whether the employee is still doing some work.
Lay-offs
A lay-off is when an employee is not provided with any work for a period of time. They remain employed but do not carry out any duties and, in most cases, will not receive their normal pay (aside from any statutory guarantee payments if applicable).
Short-time working
Short-time working is when an employee continues to work, but their hours (and therefore pay) are reduced. For example, they may work fewer days each week or reduced daily hours due to a downturn in work.
Sickness During Lay-offs
Employee’s sickness rights remain during lay-offs. If one of your workers are sick during this time, you will be required to pause their lay-off period and go to your sickness absence procedure. During this time, staff will get sick pay during this time rather than SGP if eligible.
How to Manage employees currently on lay offs
Managing employees on lay-off requires clear communication, consistency, and ongoing support. Even though employees are not actively working, they are still part of your organisation and should be treated fairly and kept informed.
Start by maintaining regular contact. Keep employees updated on the business situation, expected timeframes, and any changes that may affect their role. This helps reduce uncertainty and reassures them that they haven’t been forgotten.
It’s also important to be consistent in how lay-offs are applied across your workforce. Decisions should be fair, non-discriminatory, and based on clear business reasons to reduce the risk of disputes.
You should also ensure employees understand their rights during lay-off, including any entitlement to statutory guarantee pay and when they may be eligible to request redundancy if the lay-off period becomes prolonged.
Finally, plan ahead for returning employees to work. Give as much notice as possible, ensure a smooth transition back into their role. You must also consider any support or refresher training they may need after a period away.
How The HR Booth Can Help
You may currently feel that temporary lay-offs are your only option. However, this must be handled carefully to maintain trust within your team and to avoid legal risks.
Our HR Consultants work closely with employers to make sure temporary lay-offs are handled compliantly, fairly, and communicated correctly. We can help you:
- Review your policies and contracts
- Prepare the correct documentation
- Help you through the consultation process
- Advise on best practices and risks
- Support with wider workforce planning
We’re here to help you make the right decision for your business while also maintaining a positive working relationship with your team. If you have any questions on what is lay off, or want to explore your options, contact us.
