Orders fall away and a production line has three quiet weeks ahead. Sending employees home without pay may look like a quick alternative to redundancy, but a shortage of work does not by itself remove the employer's pay obligations. Lay-offs and short-time working need a contractual basis, clear communication, accurate guarantee-pay records and a plan for the point at which employees may claim redundancy.
Know which arrangement you are proposing
A lay-off is a temporary period when an employee is given no work and no contractual pay for at least one complete working day. Short-time working is a temporary reduction in hours that leaves the employee receiving less than half a week's pay. These are legal terms with specific pay and redundancy consequences; they are not simply informal descriptions of a quiet shift or reduced overtime.
The arrangements apply to people with employee status. Casual workers, agency workers and many zero-hours workers may not have guaranteed hours, but their legal status still depends on the reality of the relationship. Do not label someone a worker merely to avoid the employee rules.
Lay-off or short-time working can preserve skills during a temporary fall in demand, supply interruption or emergency. Acas describes it as a last resort. First consider whether the problem can be managed through agreed holiday, flexible work, temporary redeployment, reduced overtime or voluntary unpaid leave. Keep the reason and expected duration under active review rather than allowing a temporary response to become indefinite by default.
Acas: how lay-offs and short-time working operate ↗ · Related guide: employment status checklist →
Check the contractual authority before reducing pay
An employer can impose unpaid lay-off or reduced-pay short-time working only where there is a lawful basis. Acas identifies an express contractual term, clear custom and practice, a national industry agreement, a collective agreement with a trade union, or a change agreed with the employee. Without that authority, employees should normally receive full contractual pay even where no work is available.
Custom and practice needs clear evidence; it is not created by having used lay-off once during an unusual event. Check employment contracts, incorporated handbooks, collective terms and any previous communications. Confirm whether the wording covers both lay-off and short-time working, whether notice is required and whether the employer has promised enhanced payments.
If the contract does not permit the proposed arrangement, seek genuine agreement before it starts. Explain the business reason, alternatives considered, expected dates, pay effect and what happens if circumstances change. A permanent contractual change must be confirmed in writing within one month. A temporary agreement should also be recorded clearly, including its end or review point. Imposing reduced pay without authority can lead to breach-of-contract and unlawful-deduction claims.
GOV.UK: lay-offs and short-time working overview ↗ · Related guide: deductions from wages →
Consult fairly and define the operating rules
Even where a contract contains a lay-off clause, consultation matters. Give employees and any recognised trade union reliable information about the shortage, proposed selection, likely duration, pay, availability expectations and review dates. Invite practical alternatives and answer questions before issuing the final arrangement. A clause is authority to act within its scope—not permission to act arbitrarily.
Choose affected employees using objective, business-related reasons. A blanket decision for one shift may be defensible where the work has disappeared; choosing individuals because of age, disability, pregnancy, family leave, union activity or another protected ground is not. Consider whether selection criteria indirectly disadvantage a protected group and whether reasonable adjustments affect an employee's ability to undertake alternative work.
The written notice should state whether this is lay-off or short-time working, the start date, anticipated duration, work and contact expectations, pay treatment, holiday position, benefit arrangements, review dates and a named contact. Employees continue to accrue statutory holiday in the usual way unless the special rules for irregular-hours or part-year workers apply.
Calculate statutory guarantee pay correctly
On a workless day when an eligible employee would normally be required to work, statutory guarantee pay is the legal minimum. At 4 October 2026, the maximum is £41 per day for up to five days in any three-month period: a maximum of £205. If normal daily earnings are below £41, the employee receives the normal daily rate. Part-time entitlement is proportionate to the days normally worked.
Eligibility normally requires one month's continuous employment, reasonable availability for work, no unreasonable refusal of suitable alternative work, and that the lay-off is not caused by industrial action. No guarantee payment is due for a day on which any work is done, or where the employee is on holiday or off sick. A contractual scheme may pay more but must not undercut the statutory arrangement.
Payroll needs the scheduled working days, whether any work was performed, the employee's normal daily rate, previous guarantee days in the rolling three-month window and any contractual enhancement. Not paying statutory guarantee pay can amount to an unlawful deduction from wages. Keep the calculation with the absence and pay record so it can be explained later.
Check the authority, consultation and payroll plan together.
HR + SAFETY can help North East SMEs review the relevant terms, document consultation and give payroll a clear temporary-working record before pay is reduced.
Check a proposed work reductionTrack when an employee may claim redundancy
There is no general maximum duration for lay-off or short-time working, but employees may gain a route to statutory redundancy pay. An eligible employee can give written notice of intention to claim after receiving less than half a week's pay for four or more consecutive weeks, or six or more weeks in a 13-week period where no more than three are consecutive. They need at least two years' continuous employment for statutory redundancy pay.
The employee must normally submit the written claim within four weeks of the relevant period ending. The employer then has seven days to accept it or issue written counter-notice. Counter-notice is appropriate only where the employer reasonably expects at least 13 consecutive weeks of work to begin within four weeks. Silence counts as acceptance.
If the claim is accepted, not answered in time or the counter-notice is withdrawn, the employee must still resign within the statutory window and work the applicable notice to obtain redundancy pay. These timings are easy to mishandle. Refer any notice of intention immediately rather than treating it as an ordinary grievance or resignation.
Acas: applying for redundancy pay ↗ · Related guide: redundancy process for small businesses →
Employer checklist before work is reduced
For a North East manufacturer, service business or contractor facing an interrupted order book, the most useful document is a live decision record—not a standard lay-off letter used in isolation. It should connect the contractual authority, consultation, individual notices, payroll data, weekly threshold tracker and return-to-work forecast. Legal requirements and official guidance were checked on 4 October 2026.
- Confirm whether the person has employee status and guaranteed contractual hours.
- Identify the express term, collective agreement, established custom or employee agreement that permits the arrangement.
- Record why the shortage is temporary and which alternatives have been considered.
- Consult affected employees and any recognised trade union before finalising the plan.
- Use objective selection reasons and check discrimination and reasonable-adjustment risks.
- Issue written dates, pay rules, availability expectations, contact arrangements and review points.
- Give payroll the information needed to calculate £41 statutory guarantee pay and any enhanced entitlement.
- Track weekly pay against the four-week and six-in-13 redundancy thresholds.
- Escalate any written redundancy claim immediately so the seven-day response limit is not missed.
- Review whether the work is returning; if the reduction is no longer temporary, start the appropriate redundancy or contractual-change process.
Lay-offs and short-time working can provide breathing space only when the legal and practical controls are in place. Check the contractual power before reducing pay, consult and select fairly, give employees precise written arrangements, calculate guarantee pay correctly and monitor the statutory redundancy thresholds from the first affected week.
This guide provides general information for UK employers. It is not legal advice and should not replace advice based on the facts of a specific matter.