UK employment law may appear complex and confusing. However, in some ways , there are many similarities to other countries. The following are only guidelines in the broadest sense, and professional legal services are recommended when employing in the UK.
Key Factors to Consider When Employing in United Kingdom:
There are several key areas to be aware of within the UK’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.
The UK does not require written contracts for employment, but within two months of starting work, the employee is entitled to a statement of the main terms of employment.
There is no law explicitly limiting probationary period length. However a probationary period and any extension must be “reasonable”. In practice, probationary periods are typically 3 months and not longer than 6 months. However, various protections and benefits such as pension options begin to apply at 3 months regardless of employee status.
a. Annual Leave
Employees have a statutory right to a minimum of four weeks’ annual paid holiday. In the first year this leaves accrues on a pro rata basis.
b. Sick Leave
In the UK there is a statutory sick pay scheme (SSP). Employees earning over a minimum limit are entitled to receive SSP on days they are away due to sickness.
The main rules of SSP are that the employee does not start getting SSP until after the first 3 days of absence, and receive SSP for a maximum of 28 weeks. The employee must provide evidence of sickness (e.g. a doctor’s certificate).
c. Maternity Leave
All pregnant employees (regardless of length of service) are currently entitled to 26 weeks’ Ordinary Maternity Leave (OML) which can be taken at any time from the 11th week before the expected childbirth.
Employees who have or will have served at least 26 weeks’ with the employer by the start of the 14th week before birth qualify for Additional Maternity Leave (AML), which provides an additional 26 weeks after the OML.
Employees who have or will have at least 26 weeks’ service by the 15th week before the birth are entitled to 26 weeks’ Statutory Maternity Pay. The first 6 weeks are paid at 90% of the employee’s normal weekly earnings while the remaining weeks are paid at a rate set by the Government.
Employers can recover either 92% or 100%, plus compensation, of SPP paid (depending on the size of the company).
d. Paternity Leave
Employees who are the biological father or the mother’s husband/partner and expect to have responsibility for the child’s upbringing, and have completed 26 weeks’ service by the 15th week before the baby is due, are entitled to two weeks’ paternity leave. This leave must be completed within 56 days of the date of childbirth.
Employees earning over a weekly lower earnings limit are entitled to Statutory Paternity Pay (SPP), at the same rate as Statutory Maternity Pay.
Employers can recover either 92% or 100%, plus compensation, of SPP paid (depending on the size of the company).
e. Adoption Leave
An employee with 26 weeks’ service by the week in which they are notified of an adoption are eligible for adoption leave. Employees earning over a weekly lower earnings limit for National Insurance Contributions are entitled to 26 weeks’ paid Ordinary Adoption Leave (OAL). Only one member of a couple who adopt jointly may take adoption leave.
Statutory Adoption Pay (SAP) is paid at the same rate as Statutory Maternity Pay.
Employers can recover either 92% or 100% plus compensation of SAP paid (depending on the size of the company).
f. Parental Leave
Parents of either gender with over one year’s service and who have parental responsibility for a child can take up to 13 weeks’ unpaid parental leave per child. For disabled children the period is 18 weeks.
The right to take parental leave normally ends when the child is 5.
Pensions and Benefits
In the UK a National Insurance Scheme covers a range of funds from pension, to maternity leave and unemployment. There are different classes of National Insurance (NI) depending on the employment status and salary.
At the lowest class of NI, employees and employers do not contribute anything, however the employee still gains the benefits of NI. From the second class onwards, the employer contributes 13.8% and the employee contributes 12%. The exact or additional can vary depending on a multitude of factors.
Aside from the National Insurance mentioned above, any employer with 5 or more employees is required to designate a stakeholder pension scheme. However there is no actual obligation on the employer or employees to join the scheme or contribute. Rather, the employer must simply provide access to one, and the employees may voluntarily opt to join it. Any such contributions are deducted directly from the Employee’s earnings.
Statutory Working Hours
The statutory working hours for the UK are 9am – 5pm on Monday-Friday.
Specific Regulations about Overtime
Overtime is any time worked outside the hours stipulated in the employment contract. Employers are not required to pay workers for overtime. However, the employee’s pay for the total hours worked must not fall below the national minimum wage.
Employees may not be compelled to work for more than 48 hours per week on average (usually over 17 weeks including work-related training, work-related travel and work-related lunches, excluding travel to and from work, and lunch breaks).
By signing a written opt-out agreement, employees can agree to work longer than the 48-hour limit. They may cancel this opt-out agreement whenever they wish as long as they give the employer at least 7 days’ notice.
Paid Public Holidays
The public holidays (‘bank holidays’) in the UK for 2019 are:
- New Year’s Day (1 January)
- Good Friday (19 April)
- Easter Monday (22 April)
- Early May Bank Holiday (6 May)
- Summer Bank Holiday (26 August)
- Christmas Day (25 December)
- Boxing Day (26 December)
If a bank holiday falls on a weekend, a ‘substitute’ weekday becomes a bank holiday, normally the following Monday.
Public Holiday Pay Rate
Paid leave does not have to be given on public holidays. They may be included as part of the employer’s statutory annual leave.
Working on Sundays
Sunday working – for those working in shops as well as betting workers, protection and option to opt-out of work during Sundays.
Disclosure and Confidentiality of Personal Information
Employees are protected from disclosure of their personal information by the General Data Protection Regulation (GDPR). Under the GDPR, employers must comply with the following principles when handling the personal data of employees:
- Process personal data fairly, lawfully and in a transparent manner
- Obtain data for lawful purposes and refrain from using it in a manner which is incompatible with those purposes
- Ensure it is accurate, relevant and up to date
- Ensure it is not kept for longer than necessary
- Ensure it is kept secure
If a personal data breach occurs that is likely to result in a risk to the rights and freedom of an individual, the employer must inform the Information Commissioner’s Office (ICO) within 72 hours and if the risk is high, also inform the individual concerned.
Employees may lodge complaints to the ICO if they have concerns about an organisation’s information rights practices.
Employee Protection and Anti-discrimination Rights
Employees are protected from discrimination in the workplace by the Equality Act 2010, in matters including, but not limited to, dismissal, employment conditions, remuneration, career advancement and recruitment.
Employers are required to protect employees from discrimination and/or other treatment, by refraining from engaging in discriminatory workplace practices. This can include not hiring someone, selecting a person for redundancy, or paying someone less than another employee, on the basis of a personal characteristic e.g. age, gender or religion.
Time Off Work
Almost all employees have a statutory right (conditions apply) to take paid time off work for the following:
- To carry out duties as a trade union official
- To carry out duties as a trade union health and safety representative
- To look for work if faced with redundancy
- To receive ante-natal care
- To have a baby, take paternity leave, take adoption leave, take shared parental leave or to ask for flexible working hours
Annual Leave Accrual Entitlement
All full-time employees are entitled to at least 28 days’ paid annual leave per year. The equivalent is 5.6 weeks of holiday. Bank (public) holidays may be included as part of statutory annual leave.
Part-time employees are also entitled to 5.6 weeks of paid holiday, but the number of days is fewer than 28 because they work fewer hours per week.
Employees working irregular hours e.g. shift workers need to calculate their leave entitlement for irregular hours, which may be done here.
Annual Leave Expiry
Whether the employee’s annual leave expires in the year it is accrued, is at the employer’s discretion. If the employee agrees, unused annual leave may be carried over the next year.
Annual leave must be carried over into the next year if (i) illness prevents the employee from taking annual leave or (ii) the employer has agreed to it in the employment contract.
If an employee is unable to take annual leave because they are taking time off for different reasons e.g. maternity or sick leave, they may carry over some or all of the untaken leave into the next year. An employer must allow an employee to carry over a maximum of 4 weeks if the employee is absent due to sickness and unable to take their leave.
If the employee chooses not to take annual leave during sick leave, they may carry forward the untaken leave for up to 18 months from the end of the year in which the leave arises.
Annual leave reporting frequency
As soon as possible
Annual Leave Accrual Cash Out
Generally, all leave is to be taken within the year of employment. It may be paid out (or carried over into the next year) if this is provided for in the employment contract. However in this case, it must be clear that the employee has been encouraged to use their annual leave. Paying out annual leave cannot be used as an incentive for the employee not to take it.
Annual Leave Accrual paid to Employee
Accrued annual leave is not paid to the employee (see above). Anything above the statutory entitlement of 5.6 weeks may be paid to the employee is this has been stated in the contract.
Managing pre-existing Annual Leave
It is possible to transfer pre-existing annual leave to a new employer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE Regulations).
Accrued Leave at Termination
All unused accrued annual leave is paid out upon termination (unless it is transferred to the employee’s new employment).
Negative annual leave accrual
The employee may take negative annual leave.
Paid Sick Leave Entitlement
In the UK, employees are entitled to Statutory Sick Pay (SSP).
Employees may receive £92.05 per week for illness-related absence from work. To qualify, the employee must have been off work sick for at least 4 days in a row (including non-working days). The first 3 days are ‘waiting days’ and are unpaid, unless the employee has already received SSP within the last 8 weeks and that included a 3-day waiting period. SSP may be paid for up to 28 weeks.
The statutory amount stipulated above is a minimum, and the employee may be entitled to more based on the terms of their employment contract.
Maternity Leave in United Kingdom
Statutory Maternity Leave is 52 weeks and is made up of Ordinary Maternity Leave (first 26 weeks) and Additional Maternity Leave (last 26 weeks). Employees must take 2 weeks’ leave after childbirth.
The earliest day for commencing leave is 11 weeks before the expected week of childbirth. Otherwise, leave will begin on the day after childbirth or if the employee is absent from work due to a pregnancy-related illness in the 4 weeks before the week that the baby is due. A week is Sunday to Saturday.
8 weeks’ notice must be given to the employer if the employee wishes to change the date on which they return to work.
Statutory Maternity Pay
Statutory Maternity Pay (SMP) is paid for up to 39 weeks and is equivalent to:
- 90% of the employee’s average before-tax weekly earnings for the first 6 weeks
- The lower of £145.18 or 90% of the employee’s average weekly earnings for the next 33 weeks
Tax and National Insurance are deducted from SMP.
SMP commences on the day maternity leave is taken or when the employee is absent from work due to a pregnancy-related illness in the 4 weeks before the week of expected childbirth.
Severance / Redundancy Pay
The employee is entitled to statutory redundancy pay if they have been working for their employer for 2 or more years. Redundancy pay is equal to:
- Half a week’s pay for each full year that the employee was under 22
- One week’s pay for each full year that the employee was 22 or older, and under 41
- One and a half week’s pay for each full year that the employee was 41 or older
The length of service is capped at 20 years.
The weekly redundancy pay is capped at £508 and the total is capped at £15,240.
The employee is not entitled to redundancy pay if the employer offers them suitable alternative work and the employee refuses it without good reason.
Termination of Employment
The process involved in terminating an employment contract depends on the reason for termination and the employee’s length of service.
An employer-initiated termination for gross misconduct requires no notice period. Gross misconduct involves a serious violation of workplace conduct. What constitutes gross misconduct depends on workplace policy and the terms of the employment contract.
An employer-initiated termination for poor performance, misconduct or redundancy requires a notice period, depending on the employee’s length of service.
If an employee seeks to resign on good terms, they are required to submit a resignation letter.
Probation Period Termination
Termination during the probation period generally requires 1 week of notice.
Statutory Notice Period Employer With Cause
For employer-initiated termination on the ground of gross misconduct, no notice period is required.
Statutory Notice Period Employer Without Cause
For employer-initiated termination on the grounds of redundancy, poor performance or misconduct, the notice periods are:
- At least 1 week’s notice if employed between 1 month and 2 years
- 1 week’s notice for each year if employed between 2 and 12 years
- 12 weeks’ notice if employed for 12 years or more
Statutory Notice Period Employee With Cause
Under limited circumstances, termination is effective immediately.
Statutory Notice Period Employee Without Cause
The employee is required to give a minimum of 1 week’s notice after working for 1 month.
It is common for an employment contract to require 1 month’s notice.
Payment in Lieu of Notice
The notice period may be paid out in lieu.
The length of the probation period is agreed upon between the employer and employee and is typically between 1 and 6 months.
Maximum Probation Period Length
Generally, a probation period is no longer than 6 months. However, there is no legal limit on the length of the probation period.
Every employer in the UK is required to enrol their employees in a pension scheme and make contributions. Once the employee has been enrolled for 3 months, they are automatically enrolled and have 1 month to ‘opt-out’ which means they will not receive any employer pension contributions. Contributions start in the 4th month of employment (and are not backdated).
Employers and employees are required to contribute 2% and 3% respectively to the employee’s pension scheme.If the employer contributes more than this minimum amount, the employee can contribute less, as long as the balance of 5% is met.
The pension contribution is calculated based on qualifying earnings. Qualifying earnings are all earnings between GBP6,032 and GBP46,350 for the 2018/19 tax year.
Because contributions are made on a relief at source basis (i.e. they are taken from after-tax earnings), the employee is only required to contribute 80% of the 3%, and the other 20% is claimed from the government by the pension fund. Effectively, the employee is only contributing 2.4% (80% x 3%) of their salary to the pension fund.
Employees are not required to have private pension. They may request that the employer pays contributions into a fund of their own choice.