Can a company lay employees off to avoid compulsory redundancies?

If an employer is facing only a temporary dip in its need for employees, it may prefer to lay employees off temporarily or reduce their working hours for a limited period, rather than make them redundant and lose their skills.

Generally, if an employer lays off employees or puts them on short time working on less than normal earnings, then it will be acting in breach of contract unless it has reserved to itself the contractual right to do so [ Contractual issues]. This right might be set out in an express term of the contract or in a collective agreement (such as the EEF National Agreement [ Guarantee of employment] that has been incorporated into the contracts by reference. Alternatively, the right might be implied by custom and practice.

In the absence of a contractual right, the employer may nevertheless be able to reach agreement with the employees either individually or via their representatives (if changes to terms and conditions are usually negotiated collectively) to cover the specific circumstances the employer is facing. The agreement should specify whether the employees are to receive any pay for the workless days. As a minimum, an employee who has no right to be paid during a workless day may still be entitled to a statutory guarantee payment (which currently stands at £18.90) for a maximum of 5 days (pro rata for part timers) in any three-month period [ Guarantee payment].

Employees who have been laid off or kept on short time working for four or more consecutive weeks, of for any six or more weeks in a period of thirteen weeks can elect to resign and claim a redundancy payment although the employer may in some circumstances resist the claim [ Claiming a redundancy payment].

The EEF Employment Guide is intended to provide general guidance only. It does not purport to be comprehensive or to give legal advice. Users should always seek specific legal advice before taking or refraining from any action. Information and documents on this website are prepared in accordance with the laws of England, Wales and Scotland. Users accessing from Northern Ireland should be aware that different laws and interpretations may be applicable to Northern Ireland.