Short-time working: the most important facts for employers and employees

There are countless reasons why busi­nesses may face financial dif­fi­culties – from new products flopping, pro­duc­tions being halted due to a fire at the factory, to staff striking or weather con­di­tions impacting a business. Labour costs make up a sig­ni­fic­ant share of business operating costs. That’s why employers generally have three options: lay-offs, temporary leave or furlough, or short-time working.

Where an employee is put on short-time working due to a lack of work available, jobs for qualified staff can be saved and costs can be reduced. In this article, we’ll discuss the concept of short-time working, under which con­di­tions employers can apply for it, and what the financial con­sequences for staff are.

Short-time working is a means for busi­nesses to retain staff during economic crises or hardships. Far from al­tru­ist­ic, the measure makes economic sense: without short-time working, companies would be laying off qualified staff only to rehire new employees once the business recovers – a process that incurs con­sid­er­able expenses.

Entire de­part­ments or all staff at a company can be asked to work short-time as long as certain con­di­tions are met.

Generally, a company would set out any ar­range­ments of short-time working programs in an em­ploy­ment contract. However, to qualify for short-time working com­pens­a­tion through statutory guarantee pay, certain con­di­tions need to be met by the employer and employee. These broadly involve the following:

• The lack of work needs to have economic reasons or be caused by issues beyond a company’s control, for example, natural cata­strophes or gov­ern­ment in­struc­tions.
• A company should have con­sidered all the al­tern­at­ives to minimise the lack of work, for example, by reducing overtime.
• The shortage of work is temporary and it’s predicted that employees will return to a normal work schedule at some point in the future.
• Short-time working must be specified in an em­ploy­ment contract (or al­tern­at­ively can be added in certain in­dus­tries later on).

Typically, employees should not be kept on short-time working for more than three months and statutory guarantee pay only covers that amount of time. Where staff are kept on short-time working for longer, it can be con­sidered a re­dund­ancy.

More extensive in­form­a­tion on lay-offs and short-time working ar­range­ments in the UK can be found on the gov­ern­ment website.

Because of the wide-ranging work shortages causes by the coronavir­us crisis, the UK gov­ern­ment pledged a relief package of £330 billion to support busi­nesses and en­tre­pren­eurs stay afloat during these times. As part of the grant, employers can claim 80% of normal pay for fur­loughed employees at a £2,500 cap. Many companies have also opted for short-time working schemes during this time of crisis to avoid making staff redundant once lockdown pro­vi­sions come to an end. Im­port­antly, the grant does not cover short-time workers.

UK employees generally must meet the following criteria to qualify for the gov­ern­ment’s work retention scheme:

• Be put on temporary leave and notified of this in writing. In other words, the scheme does not cover short-time working employees.
• Be employed (full-time or part-time) and have been with the same employer since February 28, 2020.
• Be in­struc­ted by the employer to cease all work.
• Be fur­loughed for 21 days or more.
• Employers can only claim the grant for furlough initiated as a con­sequence of the coronavir­us.

Employees on short-time working programs will have their hours and con­sequently their wages reduced. Legally, employers are required to pay their staff the same amount for their hours worked. In addition, they must pay statutory guarantee pay over a period of time (no longer than three months) as set out in an em­ploy­ment contract.

Employees only qualify for short-time working if they have been con­tinu­ously employed by a company for at least one month. They must be available to work and not be refused reas­on­able al­tern­at­ives for work. Short-time working also does not apply to lay-offs because of in­dus­tri­al actions.

As such, the following are excluded

• Leased employees
• In­ter­mit­tent employees
• Temporary employees
• Seasonal workers
• Corporate officers or stock holders in a company

Whether an employer can put staff on short-time working or not is stip­u­lated in an em­ploy­ment contract. This would also typically contain a clause on how long such measures would be in place for. During these times, statutory guarantee pay must be paid in addition to the reduced normal wages.

In addition, employees may be able to apply for other gov­ern­ment benefits such as Universal Credit and jobseeker’s allowance.

In addition to a reduced wage depending on the hours you

agree to continue to

• work as part of short-time working, employers must pay statutory guarantee pay. This is set at £30 per

day for five days over a total of three months.

An employee is entitled to a maximum of £150 per week. Employees may also get less if their daily rate is below £30.

For part-time workers, statutory guarantee pay is worked out based on their part-time hours per annum.

Usually, short-time working agree­ments are meant to cover short dry spells in available work. They are not designed to keep staff on reduced hours for much longer than three months. Statutory guarantee pay is re­stric­ted to three con­sec­ut­ive months (i.e. five days per week). In other words, short-time working is an emergency measure during times of financial and economic hardship and shouldn’t be abused to retain staff on part-time hours.

Employers can also interrupt short-time working if, for example, a large contract job requires urgent help.

Most busi­nesses will usually aim to avoid putting their employees on short-time working programs. This includes advising staff to take unused paid leave instead. Where a holiday has already been planned, employers can’t force staff to change their plans. For paid leave taken during a short-time working period, employees will continue to receive the same benefits and wages agreed.

Where an employee goes on holiday having used up all their paid leave, no benefits will be paid. It is unlikely that an employer will continue to pay wages in this case, but it’s best to check with your boss or em­ploy­ment contract for the specifics.

If you’re being asked to work short-time, your pay will usually be cut in half or less. A drop in your income will result in lower taxes. In some cases, employees can claim tax refunds.

Where an employee is laid off, they can claim tax refunds by the end of the tax year.

Yes, if workload does not return to normal, employers can make staff redundant after the agreed period on short-time working.

Where an employee earns less than half of their normal wage, they can argue they’ve been made redundant and receive re­dund­ancy pay if:

• They were working for a company for two years
• They were short-time working or laid off for more than one month con­tinu­ously
• Or they were short-time working or laid off for six weeks over a period of 13 weeks

Please note the legal dis­claim­er relating to this article.