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Employment in United Kingdom

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 points on employment 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.

  1. Contracts:

    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.

  2. Probation Periods:

    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.

  3. Termination Procedures:

    A.  Notice Period

    Employees are entitled to a minimum of 1 week’s notice after 4 weeks’ service. This increases to a minimum of 2 weeks’ notice after completion of 2 years’ service and a further 1 week’s notice for each additional year of service up to a maximum of 12 weeks’ notice after 12 years’ service.

    The minimum notice periods are according to the length of service, as follows:

    • No notice if the employee has been employed for less than 1 month;
    • one week, if the employee has been employed for 1 month to two years;
    • one week for each year of employment if the period of employment is between two and 12 years;
    • 12 weeks if the period of employment is 12 years or more.

    B.  Procedure

    Terminating an employee’s position must follow reasonable cause with due procedure. The specifics of a sufficient procedure depends upon the business, the employee and the circumstances of a dismissal, so professional or legal advice would be required in most cases.

    In general, the procedure should follow a clear and structured disciplinary, review or other tools to give the employee warning of any problems and a reasonable chance to respond and resolve them. For example, for performance issues, the employee should receive warnings first which explain why the performance is unsatisfactory. Other options such as investigating whether the employee’s position could be changed should also be investigated. Even for misconduct, the offense must be serious enough to warrant instant dismissal, otherwise the employee should be subject to some disciplinary proceedings first.

    C.  Severance Pay

    Aside from unpaid benefits (e.g. accrued minimum leave entitlement in lieu) there are no statutory requirements for severance pay except for economic dismissals (e.g. redundancies).

    In the event of redundancy, redundancy payments are required for employees who have been employed for at least two years with the employer. The number of weeks’ pay depends on the age of employee, and service, as follows:

    • 5 week’s pay for each year where the employee was below 22;
    • 1 week’s pay for each year the employee was between 22 to 40;
    • 1.5 week’s pay for each year the employee was 41 and over.
  4. Statutory Leave:

    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.

  5. Pensions and Benefits:

    A.  National Insurance

    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.

    B.  Pension Scheme

    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.

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in the UK. For companies which intend to employ their staff directly through their incorporated UK entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in the UK.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into the UK.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in the UK

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in the UK

– the company needs help with tax, employment, immigration and payroll compliance in the UK

Shield GEO can contract directly with the company to employ and payroll their staff in the UK. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits.  Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.

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