While the UK is not as heavily regulated as some other countries, there are certain obligations businesses need to comply with when seeking to hire UK employees. We set out the highlights below:
- Decide who will employ your first UK employees
Will you set up a branch or subsidiary in the UK or use agency workers supplied by a UK employment agency? Employers of Record (EoR), also known as Professional Employer Organisations, have become very popular in recent years. Typically, the UK EoR will employ the UK employees on behalf of their client company which does not have a UK presence. The EoR then assigns the UK employees to the client and takes care of the necessary UK employment obligations, tax withholdings and pension arrangements.
- Employees or not?
Consider whether you will hire employees (either on a permanent or fixed term basis) or if you will use self-employed contractors instead. There is also a further category under employment law, that of ‘workers’. Individuals will have different employment rights and be treated differently for tax purposes, depending on their status, so it is important to be clear on how your workforce is categorised for these purposes.
- Employment contract
Employees must be provided with a written statement of their employment terms no later than their start date. Most employers will include the required statement terms in an employment contract.
- Withholdings
Employers must make deductions from pay for income tax and social security contributions (known as National Insurance contributions).
- Pensions
All employers must enrol their employees into a workplace pension scheme and must make minimum contributions of 8% of pay into that pension scheme as follows. The employer must pay a minimum of 3% and the employee must pay a minimum of 5%. Employees have the right to opt out.
- Immigration
It is a criminal offence to employ a person who does not have the legal right to work in the UK and a sponsor licence will usually be required to employ non-UK nationals.
- National minimum wage
There are minimum hourly rates of pay for most workers. These vary from £6.40 for apprentices to £11.44 for those aged over 21. The rates are revised in April each year.
- Dismissing employees and minimum notice periods
An employer does not need one of the statutory reasons for dismissal if the employee has less than 2 years’ service, although the right not to be dismissed for a discriminatory reason or for whistleblowing are day 1 rights. Minimum statutory notice periods apply. These are that the employer must give employees: with more than one month but less than 2 years’ service, one week’s notice; with more than 2 years’ service one week’s notice for each complete year of service up to a maximum of 12 weeks’ notice. Once the employee has one month’s service they must give their employer one week’s notice. Longer notice periods can and often are agreed between the employer and employee.
- Minimum vacation and sick pay entitlements
The minimum UK vacation entitlement for a full time worker is 28 days, including public holidays. Employers can and do often grant more than this. Employees who have been off work for more than 4 days are entitled to statutory sick pay (SSP). The rate of SSP is currently £116.75 and is reviewed every April. SSP is payable for a maximum of 28 weeks. Employers often pay company sick pay which exceeds SSP.
- Insurances and policies
All employers with UK employees must have employers’ liability insurance to cover claims made by their employees who are injured or become ill at work, where their injury/illness is the fault of their employer. All employers must have disciplinary and grievance policies and those who have 5 or more employees must also have a health and safety policy.
This is a brief summary only of key UK employment rights and obligations. Employers also need to consider their data protection obligations and how to protect their confidential information, workforce and customer connections.
We can advise in more detail on the above and also your other employment law needs.
Please contact Penny Hunt, Head of our Employment practice
