Prerequisites and Requirements
Short-time working occurs when an employee’s hours of work are temporarily reduced (resulting in less than half a week's pay), or where an employer temporarily lays off staff without pay because of a severe downturn in business or unexpected operational disruption. To implement short-time working or lay-offs lawfully, the reduction in work must be temporary and unavoidable. Where eligible under Sections 28–35 of the Employment Rights Act 1996 (ERA 1996), employees with at least one month of continuous service are entitled to Statutory Guarantee Pay (SGP) from the employer for workless days, up to statutory limits over a rolling 3-month period. Any accrued annual leave or time-off-in-lieu (TOIL) balances may also be considered in agreement with the employee to mitigate earnings loss.
Legal Basis within the Organisation
An employer cannot place employees on short-time working or unpaid lay-off unilaterally unless there is an express contractual right in the contract of employment, an established custom and practice, or an agreement reached through collective bargaining with a recognised trade union. In the absence of an express contractual clause or collective agreement, imposing short-time working without consent constitutes an unlawful deduction from wages under Section 13 ERA 1996 and may give rise to claims for constructive unfair dismissal. Where a recognised trade union or employee consultation committee exists, the employer must follow agreed consultation procedures. Additionally, under Sections 147–154 ERA 1996, employees placed on short-time working or lay-off for four or more consecutive weeks (or six weeks within a 13-week period) may be entitled to serve notice claiming statutory redundancy pay.
Substantiation and Accounting
Payroll calculations during short-time working depend on whether contractual remuneration, enhanced company pay, or Statutory Guarantee Pay applies for non-working hours. Payroll records must clearly distinguish between contracted standard hours, actual hours worked, and unworked hours. Inaccurate calculations or unauthorised wage reductions create substantial legal liability before an Employment Tribunal. In addition, accurate payroll and time data must be kept to demonstrate compliance with National Minimum Wage Act 1998 (NMWA) thresholds for all working time, as well as HM Revenue & Customs (HMRC) reporting requirements.
Time Recording and Documentation
For the duration of short-time working, timesheets and working time records must be maintained with exceptional diligence in accordance with the Working Time Regulations 1998 (WTR 1998) and National Minimum Wage rules. It is strongly recommended to set up a dedicated time tracking category for reduced or unworked hours so that contracted target hours, actual hours worked, and short-time hours can be reconstructed unambiguously for every working day and employee. Accurate records must be retained for at least 6 years to satisfy statutory payroll and HMRC compliance audits.
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