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How do I lay off staff?

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Q. “The recession means I need to lay off some staff. How do I stay on the right side of the law?”

A. “Laying off” means telling an employee not to come into work for at least a day. You will generally be entitled to do this and it can be a useful alternative to dismissing employees by reason of redundancy. However, if you do not handle the lay offs carefully, you could face claims such as unfair dismissal (if the employee has a year’s service), unlawful discrimination, breach of contract and unlawful deductions from wages.

Laid off employees are still entitled to be paid, unless you have the contractual right to withhold payment. This right can arise in a number of ways:

•    if you obtain the employee’s verbal or written agreement;•    if you have negotiated an agreement with the trade union; •    if there is a national agreement for your particular industry; or•    if there is clear evidence that unpaid lay offs are an established custom and practice.

Even if you have the right not to pay full salary during a period of lay off, most employees will be entitled to five days’ Statutory Guarantee Pay (currently £21.50 per day) in any three month period.

Try to be as transparent as possible, both in terms of your decision to lay people off and how you implement your decision. Employees are likely to be more receptive to your proposals if they understand why you need to lay people off – particularly if they understand that you are trying to safeguard their jobs in the long term.

Employees who believe that they have been unfairly singled out are far more likely to bring claims against you. You should therefore consult with employees or their representatives and carry out a fair selection process before deciding whom to lay off. You may also wish to consider requesting or requiring employees to take annual leave instead of laying them off, or implementing short time working (where an employee’s contractual hours are reduced).

If you are considering laying off skilled employees, there is a risk that they could show that they are entitled to be provided with work. If their contract does not expressly allow you to lay them off, you should therefore make sure that you obtain their consent before doing so (whether or not you pay them).

In certain circumstances (in particular, in relation to piece rate workers), employees could claim that they are redundant after a period of lay off and claim statutory redundancy pay.  They must notify you in writing of their intention to do this. If you believe that you will have work for them soon, you must respond to this notification within seven days or else you will be deemed to have agreed to their claim.

Finally, if you know that redundancies are inevitable, do not try to use lay offs as a means of avoiding paying redundancy payments. This could lead to employees resigning and claiming constructive unfair dismissal and therefore could cost you a lot more than if you went through a fair redundancy process.

Will Winch is a solicitor in the employment group at Mishcon de ReyaRelated articlesUnfair dismissal claims on the riseMore people claiming jobless benefitsFDs dish out pay rises

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