In a previous article we gave advice to employers on coronavirus planning, keeping communication lines open, promoting workplace hygiene and managing suspected cases of COVID-19, sickness absence and sick pay.

In this article we will look at options for employers who have no choice but to make cuts to the workforce in order to survive.

Enforced holidays

Employers are able to force employees to take their annual leave if this is required. This is unlikely to be a preferred option if you are struggling for cash as you are required to pay full pay, but it may be useful if you are a cash-rich employer who simply does not have any work for your team to do. One advantage of doing this is that the business won’t face a holiday backlog once normal service resumes later in the year. A key risk is that employees will be less motivated if they are unable to take holiday later in the year when they really wanted to.

To force the taking of holiday, you are required to give notice of at least twice the number of holiday days in advance of the proposed holiday shutdown.

Temporary lay-offs

If your employment contracts allow temporary lay-offs, then this is a cheaper option that you can explore. We can check your contracts for you if you aren’t sure. If they don’t allow for temporary lay-offs, there is a risk of employees claiming breach of contract, potentially unfair dismissal and unlawful deduction of wages. While you might hope that they would understand your position at this difficult time, it certainly isn’t guaranteed.

Shorter Lay-offs: Provided an employee is only required to be “laid off” for 4 weeks, or 6 weeks in a 13 week reference period, they will (if they have more than one month’s service) only be entitled to £29 per day for a maximum of 5 days in a rolling 3 month period. This is on the condition that they have not unreasonably refused alternative work and have ensured they are reasonably available to start work again should the business re-open.

Longer Lay-offs: If the employee is not required to work for more than 4 weeks, or for more than 6 weeks in a 13 week period, they may be entitled to claim redundancy payment. At this point, they would need to provide you with a notice of redundancy entitlement. If you are provided with a notice of redundancy by an employee then you are able to counter this, provided the business will be able to re-open in another 4 weeks’ time.

You aren’t entitled to keep an employee on temporary layoff indefinitely. It must be for a reasonable period, otherwise you will need to consider alternative options (i.e. redundancy). If your business is facing insolvency, or unable to pay redundancy payments, then in certain circumstances the Redundancy Payment Scheme may make the redundancy payments for the business.

Please note that when employees return to work after lay-off, they will still maintain their continuity of service for employment law purposes. Another point to note is that an employee can still request to use their holiday during a temporary lay-off and they are entitled to receive payment for their holiday as they are still employees. You would then be required to pay them full holiday pay.


If you are considering permanently reducing staff headcount as a result of financial difficulties, this is usually done through a redundancy process. In reality, if an employee has worked in the business for less than two years they are not entitled to redundancy pay, but it is still important to follow a fair process so that you don’t fall foul of accusations of discrimination which could lead to an expensive employment tribunal claim.

There are different consultation requirements for redundancy processes for fewer than 20 employees and over 20 employees. The requirements are detailed but we can advise on the specifics if this is something you need to pursue.


If you intend to restructure your business in order to save costs then you will need to follow a period of consultation and potentially consider making redundancies. The process for restructuring is similar to that for a redundancy situation and you will probably want to consider changing the terms and conditions of your employees. We are able to guide you through this process if required.

Getting Expert Help

No employer wants to be in a situation where they are forced to cut their workforce, but difficult times may need decisive action to save a business. If you are an employer facing difficult decisions about cutting staff then our expert employment law solicitors are here to guide you through the options. Contact us today to book a free initial consultation with one of our team.

The Backhouse Solicitors Team

Tel: 01245 893400
Visit: 17 Duke Street, Chelmsford, Essex CM1 1JU

Or send us a message through the Contact Us page on this website