Lay-off means sending an employee home with no work and no pay for a period, whilst keeping them employed. The contract continues but you're not providing work or pay.

Short-time working means reducing an employee's hours and pay for a period, specifically where their weekly pay falls below half of their normal week's pay.

Both are temporary measures designed to help businesses weather short-term difficulties without having to make redundancies. The employee retains continuity of employment, and (in theory) returns to normal working once things improve.

This right can come from:

• An express term in the employment contract that clearly states you can lay employees off or reduce their hours and pay in specified circumstances;
• An “implied” term arising through custom and practice in your business (though this is difficult to establish and requires clear evidence of a long-standing, well-known practice that everyone understands as part of the deal); or
• Agreement with the employee (and their union, if applicable) to vary the contract to permit lay-off or short-time working.

If you lay off employees or put them on short-time working without a contractual right to do so, you're committing a fundamental breach of contract. Employees can then:

• Resign and claim constructive dismissal (if they have two or more years' service)
• Claim unfair dismissal on the basis of constructive dismissal
• Sue for breach of contract in the civil courts or an employment tribunal
• Bring a claim against you for unlawful deduction of wages

This is not a minor technical breach. It goes to the heart of the employment relationship which is the obligation to provide wages in return for work. Get it wrong and the costs in legal fees, tribunal awards and reputational damage can far exceed what you were trying to save.

Practical point: Some production companies use standard contracts that don't include lay-off or short-time clauses, particularly for office-based or permanent crew. If you're facing a downturn and don't have these clauses, you'll need to negotiate with employees rather than imposing changes unilaterally. And consider reviewing your contract template for future hires.
 

Lay-off (statutory definition) - An employee is laid off for a week if:

• Their contract says their pay depends on being provided with work, and they receive no pay that week because you don't provide work.

Short-time working (statutory definition) - An employee is on short-time working for a week if:

• You've reduced the work provided to them, and their pay for that week is less than half a normal week's pay.

Some key points:

• A 'week' runs Sunday to Saturday, unless the employee is paid weekly with reference to a different day (in which case that day defines the week).
• If you provide a contractual guaranteed minimum wage or fall-back pay above half a week's pay, the employee isn't on statutory short-time working.
• Statutory guarantee payments (explained below) don't prevent lay-off or short-time from applying, because they're not contractual pay.
• Weeks where lay-off or short-time result wholly or mainly from a strike or lockout don't count for statutory purposes.

If an employee is laid off (that is receiving no work and no pay on a day they'd normally work), they're entitled to a statutory guarantee payment (SGP) for each 'workless day', subject to certain conditions.

A workless day is any day (or part of a day) when:

The employee would normally be required to work under their contract and you don't provide work, either because there's less demand for that type of work, or because something has affected normal business operations.

As of April 2025, SGP is £39 per day, for up to five days in any three-month period. So the maximum an employee can receive in SGP is £195 in a rolling three-month period. If an employee normally earns less than £39 per day, they get their normal daily rate instead.

To qualify, employees must:

• Have at least one month's continuous employment;
• Not have been laid off due to industrial action (strike or lockout);
• Not have unreasonably refused an offer of suitable alternative work; and
• Have complied with any reasonable requirements you've imposed to ensure their availability.

If lay-off or short-time working continues for too long, employees can claim statutory redundancy pay even though you haven't dismissed them.  This right exists to protect employees from being kept in limbo indefinitely. If you're not providing work or adequate pay for a sustained period, the law treats it as equivalent to making them redundant.

Employees can claim redundancy pay if they've been laid off or on short-time working (or a mix of both) for:

• Four or more consecutive weeks, or
• Six weeks out of any 13-week period (where no more than three weeks are consecutive).

To claim, they must:

• Have at least two years' continuous employment;
• Serve written notice on you stating they intend to claim redundancy pay; and
• Do so either on the last day of the qualifying period, or within four weeks after it.

Can you contest it? Yes—but only on one ground:

You can serve a counter-notice within seven days of receiving the employee's notice, stating that you reasonably expect to provide them with at least 13 weeks of continuous normal working within four weeks of their notice.
And if you serve a counter-notice, the matter goes to a tribunal to decide whether your expectation was reasonable based on the evidence at the time.

Your defence will automatically fail though if the employee remains laid off or on short-time during each of the four weeks after they served their notice. In other words, if work doesn't actually resume, you lose.

But if you don't contest the employee’s claim (or you lose at tribunal), the employee must then resign with the appropriate notice to “crystallise” their entitlement.  The notice required is either one week, or whatever longer notice their contract requires.

They must resign within three weeks of either (a) you not serving a counter-notice, (b) you withdrawing your counter-notice, or (c) the tribunal deciding in their favour.

Statutory redundancy pay is calculated based on the employee's age, length of service, and weekly pay (capped at the statutory maximum). Importantly, their 'week's pay' is calculated based on their normal earnings, not the reduced short-time rate (so you can't reduce the payout by keeping them on short-time).

Holiday entitlement. Employees continue to accrue statutory holiday (5.6 weeks per year) during lay-off or short-time working, as long as the contract continues. If they take holiday during this period, you must pay them at their normal rate of pay, not the reduced rate (if on short-time) or zero (if laid off). You can refuse holiday requests during lay-off by serving a counter-notice.

Statutory sick pay (SSP). If an employee on short-time working falls ill, they may be entitled to SSP if they meet the usual qualifying conditions (earning at least £123 per week, off sick for four or more days). For employees who've been laid off, the position is less clear. It's arguable that they can't be 'incapable of work' due to illness if there's no work for them to do anyway.

Pension contributions. If an employee's earnings fall below the auto-enrolment qualifying earnings threshold during short-time working, you may not be required to make pension contributions. However, check the rules of your pension scheme and any terms in the employment contract.
 

These measures work best when you have:

• A genuine, short-term downturn, a gap between productions, delayed funding, or seasonal quiet period;
• A reasonable expectation that work will return within a few weeks;
• A desire to retain skilled people rather than lose them to competitors; and
• Contracts that expressly permit it, or employees that agree to it.

They're less appropriate when:

• The downturn looks permanent or long-term;
• You don't have contractual authority and employees won't agree; or
• You're just trying to delay inevitable redundancies (employees will see through this and claim anyway).

If you don't have the contractual right, you'll need to:

• Negotiate with employees (and unions, if applicable) to agree a temporary variation;
• Get their agreement in writing; and
• Be honest about why it's needed and for how long.

Employees are more likely to agree if the alternative is redundancies. But you must genuinely believe work will return. Asking people to take unpaid leave when you know the company is closing is dishonest and will backfire.

Technically, there's no legal limit. But practically, once you hit the four-week (or six-week) threshold, employees can claim redundancy pay. If you genuinely expect work to resume, you can serve a counter-notice, but remember that if you're wrong and work doesn't return, you'll lose at tribunal and still have to pay redundancy. 

The system is designed to prevent employers keeping people in limbo indefinitely.

If you can't afford to keep everyone on full pay but can afford to keep some people working, you'll need to decide who gets laid off. While there's no statutory fairness test (unlike for redundancy), you must not discriminate. Don't select people based on protected characteristics (sex, race, disability, age, etc.), and apply objective criteria where possible. It's also arguable that singling someone out capriciously could breach the implied duty of trust and confidence. 

For more information on the implied duty of trust and confidence, please see our Article: Duty of Care: Employment in the Screen Sector.

As a matter of good practice, use similar criteria to redundancy selection like skills, experience, performance and attendance.

Be transparent. Tell employees why you're implementing lay-off or short-time, for how long you expect it to last, what they'll be paid, and what happens if work doesn't return. Keep them updated. If you're evasive or economic with the truth, they're more likely to resign and claim constructive dismissal, or trigger the redundancy provisions.

• Assuming you can do it without checking your contracts. Many businesses discover too late that they don't have the right to lay off or impose short-time. Check before you act.
• Forgetting about statutory guarantee pay. You can't just send people home with nothing. If you lay them off, you must pay SGP for workless days (up to five days in three months).
• Keeping people laid off for months. Once you hit four consecutive weeks (or six weeks in 13), employees can claim redundancy pay. If you can't afford redundancy, don't let it get to that point.
• Serving a counter-notice you can't defend. Don't tell employees work will resume in four weeks if you have no real basis for believing it. If you're wrong, you'll lose at tribunal.
• Ignoring holiday accrual. Employees still accrue holiday during lay-off and short-time. If they take it, you must pay them at their normal rate.
• Discriminating in selection. If you're choosing who to lay off, make sure your criteria are objective and non-discriminatory.
• Poor communication. If employees feel they're being treated unfairly or kept in the dark, they'll either resign (constructive dismissal) or claim redundancy.

• Voluntary unpaid leave. Ask for volunteers to take time off without pay. Some people may welcome it.
• Reduced hours by agreement. Negotiate temporary part-time working, keeping pay above half a week's wage to avoid short-time thresholds.
• Holiday. Encourage people to use accrued holiday during quiet periods.
• Redeployment. Find other work for people within the business.
• Early retirement or voluntary redundancy. For those who'd welcome an exit.
• A temporary salary sacrifice arrangement. E.g. a portion of gross salary in exchange for increased employer pension contributions, saving NI), or
• Reduce non-payroll costs instead.