18 March, 2020 in Industry News

COVID 19 – Layoffs, Short Time Working and Redundancy – What are the Options?

We all hope that the number of Coronavirus (COVID-19) infections will not significantly escalate, and the impact on organisations will be contained. However, most organisations are already dealing with the consequences and considering their long-term response, including lay-offs, short time working and redundancies. The self-employed will also be asking what measures apply to them.

The following article is provided to assist clients in considering their initial options at this time. Where appropriate, you should engage legal advice in respect of same.

Under current legislation, employers are required to pay staff their contracted hours unless they are self-isolated or have COVID-19. There are options available to employers on how to manage this, but it will be dictated by employee contracts, current legislation and government support over this period.

Options for businesses include:

• Continue to pay contracted hours and monitor on an ongoing basis
• Annual leave
• Unpaid leave
• Temporary layoffs or short time working
• Redundancies

Annual Leave

If an employer asks employees to take annual leave, the employer must give the employee notice to use annual leave.  The notice must be twice the amount of the leave unless their contract states otherwise i.e. if the employer is closing for 1 week, the employer must notify employees 2 weeks before the annual leave is due to start.


Unpaid Leave, Lay Offs or Short Time Working

A lay off is when an employee is off for at least 1 day.  Short time working is when an employee’s hours are cut.

There is no limit for how long an employee can be laid off or put on short time. However, eligible employees could apply for redundancy and if they are laid off without pay or put on short time working for either:

  • 4 weeks in a row
  • 6 weeks in a 13-week period

Employees should get their full pay unless their contract allows unpaid or reduced payoffs, or the employee has expressly agreed.  The key is therefore for employers to have discussions with their employees at this time of uncertainty to attempt to put short term measures in place to ensure that businesses can be fully operational at the end of this period.

Employees who are out of work due to temporary closure may be eligible to claim job seekers.  This will be looked at on an individual basis.

The employer will be in breach of contract if they lay off an employee without pay if there is no contractual agreement or the employee has not otherwise expressly agreed to it. 

Eligible employees are entitled to statutory guarantee payment if they are not provided with a full day’s work during the time they would normally be required to work.  The maximum statutory guaranteed payment is £29.00 a day for five days in any 3-month period – a maximum of £145.00. 

Employees can claim a statutory redundancy payment if the lay-off runs for longer than 4 weeks in a row, or 6 weeks in a 13-week period.  There are strict timetables around this which we have not sought to consider in this article.



Unfortunately, the Coronavirus situation may lead to some businesses reducing the size of their workforce by making staff redundant.

Redundant employees have a number of rights and may be entitled to receive a statutory redundancy payment (SRP).

To receive an SRP, an individual must:

  • be an employee working under a contract of employment
  • have at least 2 years' continuous service
  • have been dismissed, laid off or put on short-term working (and have a qualifying period of lay off)

An SRP is based on an employee's age and length of employment and is counted back from the date of dismissal.

Employees receive:

  • 1.5 weeks' pay for each year of employment after their 41st birthday
  • one week's pay for each year of employment after their 22nd birthday
  • half a week's pay for each year of employment up to their 22nd birthday

Their length of service is capped at 20 years.

SRP is not taxable, as it's not more than £30,000. Any redundancy payment made in addition to SRP is subject to tax and National Insurance (NI).

Other termination payments made to the employee at the same time, like payment in lieu of holiday, must have tax and NI deducted.

Legal advice should be obtained before embarking on a redundancy process. 


Statutory Sick Pay (SSP)

Legislation has not yet been passed by the Government regarding SSP following the announcements made in the budget last week.  The legislation is due to be updated shortly but this may not happen until the end of the month.  However, the new rules for SSP will be backdated to 13 March 2020.

Employers with fewer than 250 employees will be able to reclaim SSP for employees unable to work because of coronavirus. This refund will be for up to 2 weeks per employee.

SSP will be payable to people who are staying at home on Government advice, i.e. self-isolation and not just those who are infected.


Self Employed and Coronavirus

Unfortunately, statutory sick pay is only payable to those employed by a business, and people who work for themselves aren't able to claim it.  Instead, self-employed individuals could claim Employment and Support Allowance (ESA) or Universal Credit. For the duration of the outbreak, the requirements of the Universal Credit Minimum Income Floor will be temporarily relaxed for those who have COVID-19 or are self-isolating according to government advice, ensuring self-employed claimants will receive support.

Individuals will need to go through a work assessment, after which they will be placed into one of two groups - a work-related activity group for those who may be able to work in the future, and a support group for those whose illness will stop them from working.



Before deciding on a long-term response, employers should:

  1. Review staff contracts of employments to consider relevant clauses, in particular lay off or short time working provisions;
  2. Discuss proposed layoffs and short time working measures with their employees to see if an agreement can be reached in relation to reduced pay and/or a combination of unpaid leave, reduced pay and annual leave;
  3. Seek professional advice on the redundancy process and the overall cost of this and whether any other process may be more suitable;
  4. Consider the extent to which the package of financial measures set out by the government, which is being revisited on a daily basis, can be utilised to deal with any short-term cash flow issues.

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Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.