United Kingdom

Overview

The United Kingdom (UK), also known as the United Kingdom of Great Britain and Northern Ireland consists of England, Wales, Scotland, and Northern Ireland. It is the fifth largest economy in the world and the second largest in Europe in terms of GDP. Global Competitiveness Report 2016-17 ranks UK seventh in the world, up 3 places from its previous year’s 10th rank. The country also ranks seventh in the World Bank’s Ease of Doing Business Rankings.

Currency: Pound Sterling (£)

Principal language: English

Government: Constitutional Monarchy

Capital City: London

Major Cities: Manchester, Birmingham, Glasgow, Liverpool

Employment Contracts

Under the Employment Rights Act 1996, employers must provide employees a written statement with terms and conditions governing employment within 2 months of the beginning of work.

Although employers and employees are free to agree to the terms governing offer of employment, British law imposes a number of obligations, protections, and rights that may override the terms of the contract. No change to employees’ contract may apply without their consent.

Under British law, certain terms are implied in contracts of employment. Implied duties of an employee include:

  • fidelity (serving the employer in good faith and not acting against its interests)
  • obedience
  • due diligence and care, and
  • protecting trade secrets and confidential information.

Work/Time Regulations

The maximum workweek in U.K. is 48 hours averaged over a duration of 17 weeks. Some sectors, such as transport, are exempt from this limitation of working hours, as the employees in these industries qualify as “autonomous decision makers” who can manage their time. Employees may agree to “opt out” of the 48-hour maximum limit by giving written consent. Employers are required to maintain certain records of the working time. Under the Working Time Regulations, employees receive:

  • a rest break for 20 minutes after every 6 hours of continuous work
  • 11 hours of rest per 24 hour period, and
  • 24 hours of continuous rest every week (or 48 consecutive hours every 2 weeks).

Employees may work 8 hours per night shift and must get the facility of free health and safety checks. The average workweek is 48 hours subject to a reference period, usually 17 weeks. Employees who are 16 and 17 years old may work 8 hours a day or 40 hours per week. Their hours of work are not averaged out, and they do not have the option to opt out and work longer hours.

Overtime Rules
Overtime means any time worked after completing the normal working hours specified in an employment contract, which usually mentions overtime pay rates. However, it is not binding on employers to pay employees for overtime; the only condition is that an employee's average pay for the total number of hours worked cannot be lower than the National Minimum Wage.

An employer may provide an employee compensatory time off in place of wages for overtime, also known as “time off in lieu.” Employers need not pay employees a premium for overtime work. The only requirement is that an employee's average pay for total hours worked does not fall below the national minimum wage.

Leave

Under the Working Time Regulations, full-time employees are entitled to a minimum of 28 days of paid annual leave each year. Unless the employment contract states otherwise, the annual leave entitlement includes bank holidays. Vacation pay is usually based on the average pay over the 12 weeks before the vacation.

Employees start to accrue annual leave from the beginning of their employment. During the first year of employment, annual leave accrues at the rate of one-twelfth of 1 completed year's entitlement at the start of each month.

Employees can carry over up to 8 unused days of annual leave into the next year. Employees who earn a minimum of the lower earnings limit (LEL) are eligible for various forms of statutory leave pay. Starting from April 6, 2017, and until April 5, 2018, the lower earnings limit is 113 pounds per week, or 490 pounds per month or 5,876 pounds per year.

Parental Leave
Eligible employees can currently take 2 consecutive weeks' paid paternity leave within 8 weeks of a child's birth or adoption in blocks of a week at a time. To be eligible, an employee must have worked for 26 consecutive weeks, or expect to have responsibility for the upbringing of the child, and be the biological father of the child or married to or the civil partner of the child's mother. Paternity pay is currently 140.98 pounds per week or 90% of an employee's average weekly earnings if the latter is a lower amount.

Maternity Leave
Pregnant employees receive 52 weeks’ maternity leave, of which the first 26 weeks is known as ‘Ordinary Maternity Leave’ (OML), while the last 26 weeks as ‘Additional Maternity Leave’ (AML). Although employees do not have to take all 52 weeks of their maternity entitlement, they must take 2 weeks' leave once the baby is born.

Pregnant employees also are entitled to receive up to 39 weeks of statutory maternity pay (SMP) if they have been working for at least 26 weeks and meet minimum earnings requirements. Maternity pay is currently 90% of employees’ average earnings for the first 6 weeks’ of maternity leave, 140.98 pounds (or 90% of normal weekly earnings, if lower) for 33 weeks after that.

With effect from April 6, 2017, to April 5, 2018, to qualify for SMP, employees must also have earned at least 113 pounds of gross pay per week as averaged over 8 weeks.

Holidays
England and Wales have 8 listed public holidays, while the same is 9 in Scotland and 10 in Northern Ireland, as listed in the following table.

The following are national holidays in England and Wales, but employers are not legally bound to give these days off:

Date Name of Holiday England and Wales Scotland Northern Ireland
Jan. 1 New Yea Yes Yes Yes
Jan. 2 2nd January No Yes No
March 17 St. Patrick's Day No No Yes
Friday before Easter Good Friday Yes Yes Yes
Monday after Easter Easter Monday Yes No Yes
First Monday in May Early May Bank Holiday Yes Yes Yes
Last Monday in May Spring Bank Holiday Yes Yes Yes
July 12 Battle of the Boyne (Orangemen's Day) No No Yes
First Monday in August Summer Bank Holiday No Yes No
Dec. 25 Christmas Day Yes Yes Yes
Dec. 26 Boxing Day Yes Yes Yes

If a public holiday falls on a weekend day, a substitute weekday becomes the holiday, usually the following Monday. In the UK, bank holidays need not be paid leave. When employees work on a national holiday, they have no statutory right to extra pay.

Benefits

Effective April 1, 2017, all employers, except some employers that in recent years were required to remit withheld income tax to the U.K. government for the first time, need to enroll their employees into a pension plan. Employers can use the independently run, government-backed defined contribution plan, National Employment Savings Trust (NEST), or their plan, which could be either a defined contribution plan or a defined benefit plan.

Auto-enrolment/NEST is in addition to existing state pensions:

  • Basic State Pension, which the National Insurance contributions (NICs) fund
  • State Second Pension, a supplement to the basic State Pension that also is funded by NICs.

The unemployment insurance scheme in the U.K. known by Jobseeker's Allowance and the contributions that employees make to the National Insurance program funds it. Contribution rates range from 2% to 12% of wages depending on compensation. Employers withhold contributions from employees’ pay and remit them to the government but do not contribute themselves.

Employers in England, Scotland and Wales, are required by the Employers' Liability (Compulsory Insurance) Act 1969 to maintain insurance for the compensation of any injury, illness, or death suffered by employees in the course of their duties.

How GPS can Help

With our Global PEO/Employer of Record services, companies can expand into UK and hire their employees without having to establish a branch office or subsidiary in UK.

  • Your candidate is hired via our UK PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services.
  • Your new employee begins work quickly as we take care of employment contracts, statutory and non-statutory benefits, and running their payroll - all in full compliance with UK laws.
  • Global PEO Services experts manage all day-to-day operational issues such as employee expenses, and severance/termination if required.
  • With no contractor risks, pass on the compliance burden to Global PEO Services.

Spin Off/M&A Support

  • Ensure continuity of payroll, benefits and HR support when acquiring or spinning off a business with employees overseas.

24/7 Support in 100+ Countries

  • Empower your teams with 24/7 support and a single point-of-contact model in which experienced client services directors are in continuous communication with information and advice.
  • We are backed by a mix of 300+ multidisciplinary experts from HR, Payroll, Finance, Tax, and Legal domains who are ready to respond to the expected and unexpected needs of your business on the shortest notice.

Easy Visibility into Your Employee Time & Attendance and Benefits Data
With our Global PEO, you get access to Mihi, our proprietary SaaS solution for time and attendance, vacation, leave management and benefits enrollment and managements. Mihi enables clients to have easy access to employee data in real time. It is designed specifically for companies with a global workforce, especially when working in multiple countries with low headcounts.

Ready for Growth When You Are
When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance and staffing support. Lean more about our end-to-end international expansion services.