The importance of inserting a lay-off and short-time working clause in your contract of employment.

With a period of economic uncertainty ahead, employers are certainly going to need to keep a strong control on their costs and be able to quickly address these should turnover start to fall.  All employers but specifically SMEs should take the opportunity now to consider inserting lay-off or short-time working clauses in their employment contracts to give them some degree of flexibility in their staffing costs without having to take steps to permanently reduce headcount.

Both lay-offs and short-time working are legally recognised tools to allow an employer to ask employees to remain at home for the short-term if there is not enough work for them to do.  This could be due to a temporary reduction in work; a delay in securing a project; or a crisis such as a flood or fire.  Lay-offs cover periods of time from 1 day upwards whereas short-time working is a reduction in the weekly hours.  There is no maximum period for which you can lay off or use short time working however, after 4 consecutive weeks of lay off or 6 weeks of short-time working in any 13 week period, an employee can request that they are made redundant.

The real value of these tools is only realised however, if there is a contractual clause in the employee’s contract which states that the employer may reduce salary or not pay employees during lay-offs or short-time working.   If there is no contractual clause, an employer can still use these but will be forced to continue to pay their employees as if they were working normally which rather defeats the object.  If an employer does have a contractual clause, they may still be liable to pay employees a ‘guarantee payment’ however the maximum is £26.00 per day for 5 days in any 3 month period and hence a lot lower than most employees’ normal salary.

As well as adding this clause to contracts for new staff, they can also be inserted into existing employee contracts however, it needs to be done with care and consultation.  Beststart HR would therefore recommend any employer looking to adopt these get specialist advice to ensure the process is implemented with minimal risk.

If you would like to discuss your employment contracts, policies, or any other matter please call Anita Wynne on Tel: +44(0)1438 747 747 or email