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Coronavirus (COVID-19) FAQS

- Health and safety measures
- Employees unable or unwilling to return to work
- Managing employees during the pandemic
- Data protection during the panademic

Furlough under the Coronavirus job retention scheme
Lay-off and short-time working
Financial support for your business

Disclaimer: These FAQs are intended to provide information and guidance on the HR and employment law implications of the Covid-19 situation. They do not constitute legal advice and should not be relied upon as such.

Lay-off and short-time working

Following feedback, we are adding “last updated” information to individual sections when we update them. If a section does not state when it was “last updated”, please assume that it was last updated on 30/03/2020.

1. What if we need to temporarily close our business and send staff home, e.g. because of supply chain disruption, or reduced demand for products or services?

In this uncertain time, businesses may want to make a plan in case they need to close temporarily and a central part of that will be deciding how best to deal with staff.

Today’s supply chains are increasingly global in nature and many are therefore vulnerable to potential disruption due to the coronavirus, e.g. if factories are located in countries operating lockdowns and are therefore unable to fulfil orders.

If UK businesses are therefore unable to obtain parts in sufficient volume, they may need to consider closing some of their production facilities or reducing production – not because of the virus itself but because they will not have the parts they need to continue production at normal levels.

Similarly, some businesses may find they need to consider closing or operating on reduced hours because with people self-isolating there is less demand than usual for their products or services.

In these circumstances, employers may need to consider temporarily laying off their employees, or putting them on short-time working.

However, employers should be aware that temporarily laying employees off without pay, or cutting back their hours with a corresponding reduction in pay, is likely to be a breach of contract, unless the employment contract expressly permits it.

Contractual clauses expressly permitting lay-off or short-time working are relatively rare in practice.

Where they do exist, they may well be subject to conditions, such as a requirement for prior consultation, agreement with the union on the period of lay-off/reduced hours, or other mitigation measures. Even if a contractual clause does not impose such conditions, as a matter of good practice the employer should not seek to rely on it without first consulting with affected employees.

Employers that impose a lay-off or short-time working without contractual authority to do so could potentially face claims for unlawful deductions from wages, breach of contract, or even constructive unfair dismissal.

The risk of such claims can, however, be reduced if the employer consults all affected employees and seeks to agree with them the period and terms applicable to any lay-off or short-time working before implementation.

If an employee is already on sick leave when lay off/short-time working begins, whether because they are self-isolating or for another reason, then they cannot be on put on lay off or short time working at the same time.

It is also important to note that employees who are laid off or put on short-time working may be entitled to statutory guarantee payments, or to statutory redundancy pay if the lay-off/short-time working persists.

Employees will understandably be concerned about any temporary closure decision; good communications, which explain the reasons for the business closure and commit to keeping staff updated on a regular basis will therefore be key to reducing anxiety and maintaining good employee relations.

Member companies that are considering implementing a lay-off or short-time working should first consult our guidance on lay-off and short-time working in response to Covid-19 and seek advice from their Make UK adviser.

They should also consider whether they can, as an alternative, put employees on furlough leave under the Coronavirus Job Retention Scheme (see the section ‘Furlough under the Coronavirus Job Retention Scheme’.

2. What about if public health advice is to close businesses?

Currently, official public health advice from the Government has only recommended the closure of certain non-essential businesses (primarily the retail and leisure sectors) to prevent the spread of Covid-19 (see the section ‘Impact of enhanced stay at home guidance’, above).

However, if the UK goes into a full lockdown similar to those in place in other countries, employers that are then required to close are likely to be able to rely on the Coronavirus Job Retention Scheme to cover at least part of their employees’ pay during such enforced closure (see the section ‘Furlough under the Coronavirus Job Retention Scheme’, above).