How to reduce staffing costs temporarily

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It is common practice for contracts of employment to hold a clause which allows the employer to implement periods of short term working or laying off staff.

Author: Dennis Chapman
Published:
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This article is 10 years old.

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It is common at this time of year that trade is not as frequent as businesses would like. As such, employers often have to look at ways of reducing the wage bill, without resorting to making unnecessary redundancies.

It is common practice for contracts of employment to hold a clause which allows the employer to implement periods of short term working or laying off staff, such as;

‘The Employer reserves the right to temporarily lay you off without pay or reduce your normal hours of work and to reduce your pay proportionately on giving you as much notice as it can reasonably give if, in the Employer’s opinion, it becomes necessary to do so.’ 

Lay Offs

If this provision is in place you can begin to implement it immediately. It is at the employer’s discretion whether to pay full wages during this period but this would generally defeat the point of the lay off in the first place. This said, employers must pay employees the statutory minimum guarantee payment of 5 days pay for every 3 months of lay off (see the BIS website for more information here).

Employers should be mindful when implementing a lay off period to write to the employee giving them a definitive date of when the period will end. 

Short Term Working

For each member of staff, you can reduce their hours, by no more than 50% and for no longer than 4 consecutive weeks. Further they should not be placed on short term working for more than 6 weeks in a 13 week period. You must give the employer written confirmation of the time period they will be on this new reduced hours pattern for, again with a definitive return date. 

Short term working is the most commonly utilised here, as it allows for staff to be kept ‘in the loop’ however reducing the wage bill.

For more information, ACAS have a definitive guide on their website. 

Dennis Chapman

In remembrance of Dennis Chapman 1951 -2015

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