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Guarantee pay
Employees laid off or on short-time working should receive their normal pay (Miller v Hamworthy Engineering [1986] IRLR 461) unless there is a clear contractual term to the contrary. The contract term can be express or implied. An implied term can arise through conduct, custom or practice, but it must be clear (see Chapter 3: Work rules and collective agreements).
A collective agreement stated that short-time working could be introduced, but only where “approved as an alternative to redundancy” by the union. Introducing it without that consent gave employees the right to use Part II of the ERA 96 (see above) to claim their full wages, since their employer had made an unlawful deduction from wages under the Act.
Davies v Hotpoint [1994] IRLR 538.
If the contract gives the employer the right to lay off workers or to put them on short-time working, they must be paid at least statutory guarantee pay, as long as they have been working for the employer for at least a month. This is the case even if the contract gives the right to lay off workers without pay.
An employer can agree to pay contractual guarantee pay that is better but not worse than statutory guarantee pay.
The rules on statutory guarantee pay are found in section 28 of the ERA 96.
Statutory guarantee pay is calculated based on normal hourly earnings, and limited to a maximum of five days’ pay in any three-month period. The maximum paid for a day is £24.20 (2013-14) (section 31, ERA 96). Employees laid off because of industrial action taken by any employees against the employer or an associated employer do not qualify for guarantee pay.
Employees who refuse an offer of suitable alternative work for the days they are laid off will lose their right to guarantee pay. If employees are denied guarantee pay in circumstances where they believe they have an entitlement, they can make a claim to a tribunal within three months of the day payment is claimed for (section 34, ERA 96).
Tribunal fees: From Summer 2013, there is to be a fee for claiming a guarantee payment in the employment tribunal: £160 to issue the claim and £230 for the hearing, regardless of the value of the claim. Given that maximum daily statutory guarantee pay for a full-time employee is just £24.20 per day for five days in any three months — giving a maximum claim value of £121, tribunal fees would effectively wipe out the value of this kind of claim. For more information about tribunal fees and remission claims see Chapter 1.
Employees with at least two years’ service who are laid off for a period of at least four consecutive weeks (or six non-consecutive weeks in a 13-week period) may be able to claim a redundancy payment (section 148, ERA 96).
Reps need to take care when negotiating arrangements for short-time working, to make sure they take account of workers’ rights to guarantee pay:
The claimants, members of the GMB general union, were hourly-paid workers at cooker manufacturer Aga Rangemaster.
As a result of the economic downturn, Aga was considering redundancies, so it began collective consultation which resulted in a proposal for a temporary reduction of working hours from 39 to 34 with an equivalent cut in pay. Working hours were compressed over four days, with no work on Fridays. The arrangement was balloted and approved and took effect as a temporary contract variation.
The EAT agreed with the employer that no guarantee payment was due under the arrangement because the effect of the collective agreement was that while hours were reduced, Friday was no longer a day on which employees would “normally be required to work”. It made no difference that the arrangement was temporary.
Abercrombie and others v Aga Rangemaster Limited [2012] UKEAT/0099/12/8M