Unpaid short-time working or lay-off

An employee who agrees to short-time working or to be laid off is entitled to be paid. Their right is to receive either statutory guarantee pay — see below, or agreed contractual terms if better than statutory guarantee pay.

Where there is no legal right to lay-off employees or put them on short-time work, employers should pay employees the full amount of the wages they would have earned if they had been allowed to work (Miller v Hamworthy [1986] IRLR 461).

An employee put on short-time working or laid off without agreement will have a tribunal claim for unlawful deduction of wages (section 13 Part II ERA 96) and breach of contract. Unlike a claim for constructive dismissal, there is no need to resign to claim unlawfully deducted wages. The claim must be brought within three months of the deduction (or within three months of the last deduction, where it forms part of an unbroken series of deductions). For more information see LRD’s Contracts of Employment, 2013.

In Davies v Hotpoint [1994] IRLR 538, a collective agreement allowed for short-time work only where “approved (by the union) as an alternative to redundancy”. The court said this meant that when employees were paid less than full wages because of short-time working without union approval, this was an unlawful deduction of wages.