Statutory guarantee pay, or SGP, is an amount payable to employees who are not provided with work by their employer, on a day they would normally work under their contract of employment, in specific circumstances.
- The payment of SGP is usually associated with employees being placed on lay-off or short-time working, however, it is payable in a broader range of circumstances. More information on lay-off and short-time working can be found on our employment law pages.
- The rate of SGP is set by the government and is £35 per day from 6 April 2023 (see our ‘Statutory rates’ page for historic rates). It is payable for a maximum five days in any three-month period for a full-time worker.
The entitlement to receive, and the obligation to pay, statutory guarantee pay (SGP) is set out within the Employment Rights Act 1996.
Every year the government reviews the rate of SGP and, normally, uplifts this as set out within subsequent rates orders.
Subject to exclusions (see below), under section 28 of the Employment Rights Act 1996 eligible employees are entitled to a statutory guarantee payment (SGP) where, on a day they are normally required to work under their contract of employment, they are not provided with work by their employer because of:
- a reduction in the organisation’s requirements for work of the kind the employee is employed to do or
- any other occurrence which affects the normal working of the organisation regarding this kind of work.
This is also known as a “workless day”. For SGP, a day is defined as the 24-hour period starting at midnight and ending at midnight. For night shifts where work takes place before and after midnight, only one day will count depending on in which 24-hour period more work is carried out.
As such, employees who are placed on statutory lay-off or short-time working may be entitled to receive SGP (more information on these provisions can be found in our employment law resources). However, SGP may be payable in other circumstances for example, where an external occurrence, such as flooding, means the workplace closes and employees cannot carry out normal work during a working day.
The entitlement to statutory guarantee pay (SGP) is subject to exclusions set out within the Employment Rights Act. Under section 29, SGP will not be payable where:
- the employee has less than one month’s continuous employment counted on the day before the period they are claiming SGP in relation to
- they were not provided with work on the day because of a strike, lock out or other industrial action affecting their employer or an associated employer
- they were offered suitable alternative work on this day by their employer, taking into account all the circumstances and not limited to the employee’s normal role, but the offer was unreasonably refused
- the employer places reasonable requirements on the employee to remain available for work, if such work becomes available, and the employee fails to comply with these requirements.
The method of calculating the amount of statutory guarantee pay (SGP) payable is set out within the legislation.
To calculate the amount of SGP payable, the employer is required to multiply the normal hours that the employee would have worked on the ‘workless day’ by the ‘guaranteed hourly rate’.
The guaranteed hourly rate is further calculated by dividing the employee’s weekly pay by the number of hourly weekly working hours. If the employee does not have normal weekly working hours, then this will be an average of hours worked over the preceding 12 weeks, or a fair representation of normal weekly hours where the employee has not worked for 12 weeks.
In most cases, this calculation will not be necessary because there is a statutory limit capping the daily amount of SGP (see ‘Limits to guarantee pay’ below).
The amount of statutory guarantee pay (SGP) payable to employees is subject to a daily cap, set by the government. SGP is payable at a rate of £35 per day from 6 April 2023 (for historic rates, please refer to our statutory rates page).
As well as the daily cap, the payment of guarantee pay is limited to a maximum of five days of SGP paid within any rolling three-month period. Therefore, for each workless day, the employer is required to assess whether the employee has been paid the maximum of five days of SGP within the previous three months.
This limit is pro-rated for employees who do not work five days a week through being capped at the number of days normally worked in the week. For example, if the employee is contracted to work two days a week they will be entitled to receive two days of SGP within any three-month period.
An employee’s entitlement to statutory guarantee pay (SGP) does not affect any contractual entitlement to receive full pay, or varied pay, during 'workless days'.
Any payment of SGP made to the employee can be offset against their contractual pay owed and, in the alternative, any payment of contractual pay made to the employee can be offset against the entitlement to SGP.