Is short-time working the future?

In today's market it is not uncommon for employers to deal with an unexpected downturn in business by reducing costs without making redundancies. Many employers are looking to short-time working as a temporary measure in this unstable climate. Whilst short-time working is an effective way to make savings without reducing the number of staff, it does not come without its complexities.

Short-time working is where the employer, by reason of a shortfall in work, reduces the number of hours an employee is required to work per week resulting in a reduction of wages of less than half a normal week's pay.

When can short-time working be imposed?

Employers can only impose short-time working if there is a contractual right to do so or if the business has a custom and practice of short-time working. Some contracts may contain flexibility clauses that allow the employer to reduce the amount of hours an employee works. An employer wishing to rely on a flexibility clause to reduce hours must ensure that any proposed changes are in fact covered by the term. Even when exercising authority under clear, well-drafted contractual terms, employers must consider the impact of such changes on employees and whether the changes are fair. This remains the case even during a financial crisis where changes to contractual terms and working practices are urgently required.

What happens when short-time working is introduced without the contractual right to do so?

If the employer introduces short-time working where it does not have a contractual right to do so, this will amount to a fundamental breach of contract allowing the employee to resign and claim constructive dismissal. If an employee has insufficient length of service to bring a claim for constructive dismissal (at least 1 year) or they wish to remain in employment, they may claim for the shortfall in wages by claiming unlawful deduction of wages.

What can an employer do?

An employer could try to vary the contract of employment by agreement. The employer should explain to its employees or trade union why it considers short-time working to be necessary with a view to obtaining their consent. Some non-contractual redundancy policies may require employers to consider short-time working before carrying out redundancies and this may help in obtaining the employees' agreement. If the reduction is to avoid redundancies, employees are more likely to agree to short-time working.

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