Hiring new employees is an important and exciting moment for any business. Business owners understand that for every challenge their business encounters, they need to acquire talents that can contribute to mitigating such challenges. This is why they need to hire qualified workers and if need be, ones that are certified in their respective fields with significant work experience even! Even though much of work depends on you, the founder or CEO of your company, you will need help from your workforce/talent pool to ensure your organisation can reach its commercial ambitions.
In this article, we will explain the entire process of hiring key individuals to include in your team to get ahead of the competition. We will also explain relevant UK employment laws that you need to be aware of to avoid any issues with the government.
Table of Contents
- How to Hire Qualified Workers and Professionals
- What are the Labor Laws in the UK
- Employees, Workers, and Contractors
- Intellectual Property Rights
- Worker Protection
- UK Employment Contracts
- Employer Liability Insurance
- UK Visa Options
- Does Brexit Affect Labor Laws or Visas in the UK?
- Does GDPR Apply to Employees in the UK?
- How to Pay Employees in the UK
- Social Contributions
- Payslips
- Currency
- Overtime Pay
- What are IR35 Rules in the UK?
- Common Worker Benefits in the UK
- Paid Time Off (PTO)
- Long-Term Sick Leave
- Maternity Leave
- Paternity Leave
- Shared Parental Leave
- Private Health Insurance
- Additional Insurance Plans
- Pension Schemes
- Retirement Plans and Pensions Schemes in the UK
- Pension Scheme Enrollment Requirements
- Types of UK Pension Schemes
- Defined Contribution Schemes
- Defined Benefit Schemes
- How to Terminate an Employee in the UK
- Notice of Termination
- Severance Pay
- Probationary Periods
- Non-compete Agreements
- Protected Conversations and Settlement Discussions in the UK
- Performance Management in the UK
How to Hire Qualified Workers and Professionals
The first thing to do is to provide the details of terms of employment to the employee(s) you wish to hire prior to their start date. This includes:
- Job title
- Probationary period
- Wage
- Hours and days of work
- Place of work
- Holiday entitlement
- Benefits
- Payment for times when the employee is off work due to ill health
- The notice period for terminating the employment and training required/provided by you
Often employers prefer to engage employees under contracts of employment, because it is beneficial for both parties. For example, it has a well-defined terms and conditions of employment when you want to hire qualified workers, express confidentiality obligations which protects the employer from employees who knowingly or unknowingly divulge sensitive company information. Creating an intellectual property clause in the contract to prevent the employee who has been exposed to sensitive technical information that might lead them to copy your proprietary designs/methods and make a profit from it, or worse compete against you. Adding a post-termination restriction on the contract also helps protect your business from an ex-employee enticing key employees or clients/suppliers with them even after they’ve left your company.
The UK has confusing labor laws that can be tricky to navigate, especially if you’re one of those employers with only a minimal workforce. If you haven’t managed a team in the UK before, then you might want to do more research on understanding the differences between “workers” and “employees,” because these terms are not as simple as they seem when it comes to the UK. In order to keep your company compliant with UK labor laws, check out our helpful guide on how to hire qualified workers in the UK.
What are the Labor Laws in the UK?
Employees, Workers, and Contractors
The terms “workers,” “employees,” and “self-employed contractors” have different definitions and rules under the Labor Laws in the UK. Self-employed contractors are exactly what they sound like. Similar to contractors in the United States, companies hire their services independently and without any association to any business entity. UK companies are not require by law to provide contractors with any benefits, although they can give bonuses willingly. It is important to remember for employers not to overstep their boundaries by misclassifying these terms under the UK labor laws.
Even simple acts of providing equipment or office space and giving specific instructions or otherwise regarding how a contractor should work, or when they should work, as well as other minute actions can get companies into trouble, because it changes the employer’s relationship to the contractor. As you can see, it isn’t easy to hire qualified workers in the UK despite your best intentions. The employer can, however, turn the contractor into his employee, provided he creates a draft employment agreement where both parties will sign and submit to the UK government.
Under UK labor laws the term “worker” can include employees and other individuals who are defined as people whose work nature falls between an employee and a contractor. For example, a 2018 litigation that went as high as the UK Supreme Court had Uber drivers won the case against the cab hailing company Uber of being classified as workers. Once you are classified as a worker in the UK, you are automatically entitled to some benefits, although they may not be as plentiful compared to regular full-time employees.
Statutory benefits for UK workers include:
- Paid holidays
- Minimum wage
- National living wage, depending on circumstances
- Protections against unlawful deductions
- Paid annual leave
- Reasonable rest breaks
- Pension contributions from employers
- Protection against discrimination
Individuals in the UK who enter into a formal employment agreement with a company are referred to as “employees.” Employees are entitled to the full range of benefits and protections under UK law.
Intellectual Property Rights
UK intellectual property (IP) rights and protection are vastly different than other countries, especially when it comes to employment. Under UK employment law all IP rights are defaulted to contractors, which is why businesses operating in the UK must explicitly state the assignment of intellectual property rights prior to letting the contractor work. The “work for hire” concept doesn’t exist in the UK.
For this reason, most foreign employers who hire qualified workers in the UK prefer a regular employment arrangement over contractual agreements. Remote’s EOR solution provides the industry’s strongest IP protections for employers in the UK.
You may also want to read: The Ultimate Guide To Securing Your Company Name In 2022 – Ideal Steps To Take
Worker Protections
Under UK labor laws workers are protected from discrimination based on race, age, gender, religion, and other qualities that are deemed worthy of protection. In 2020, the UK Supreme Court’s employment tribunal ruled that the philosophical belief of veganism should be protected under the Equality Act.
UK Employment Contracts
The Employment Rights Act 1996 states that all UK employers are required to provide their employees a written contract agreement where it clearly states all of the details of their employment whenever they want to hire qualified workers. These contracts must include things like;
- Job titles and descriptions
- Start date of their employment
- Salary and payment schedule
- Medical and dental benefits
- Pension plans
- Company rules
- Termination policies
- Other important information
Employer Liability Insurance
The UK government cares for both the employers and employees in the same level, where laws were enacted to protect both parties. In this case, requiring employers to secure a liability insurance. Liability insurance are put into place in order to anticipate a future grievance by their employee(s), so that they’ll be protected from any claims the plaintiff may bring against them and ask for compensation.
UK Visa Options
If a UK-based employer also wants to hire qualified workers overseas and they want them to relocate to the UK, then they must secure a work visa (preferably with employer sponsorship). The UK government can issue work visas to foreign skilled workers and they can assign any type of visa for visitation and employment purposes. Most UK visas are based on points system, where applicants earn points each time they satisfy a specific visa requirement.
Workers who are citizens of the European Union, particularly the European Economic Area (EEA) are often exempted from getting work visas to work in the UK. However, workers from the United States and non-EEA countries are not exempted from getting work visa before they can work in the UK.
Examples of work visas in the UK include:
- Tier 1 Exceptional Talent Visa: for well-trained and highly qualified foreign workers with certifications and years of experience in crucial fields
- Tier 2 General Visa: for foreign skilled workers who are sponsored by their employers with a job offer ready (usually direct hires) in a high demand industry
- Tier 2 Intra-Company Transfer Visa: for foreign workers who works under a UK company overseas and are now relocating to the UK in order to continue working for the same company
Contact Your Company Formations if you want to hire qualified workers from foreign regions but are not sure which visa you want them to apply for.
Does Brexit Affect Labor Laws or Visas in the UK?
No, Brexit did not affect UK labor laws in any way and will continue to apply like it has been in the past. All the same, employers who require their employees to travel abroad for business purposes must ensure that all their workers have updated passports. Foreign workers from the EU who has worked in the UK before the Brexit happened are still advised to re-check their immigration and visa status to avoid getting into trouble.
However, due to the Brexit, the UK is also required to work with agreements regarding employment (among other things) with EU countries, as well as other countries, so the visa requirements may vary from case to case.
Does GDPR Apply to Employees in the UK?
Although the General Data Protection Regulation (GDPR) is law drafted by the EU, it also applies in the UK (as does in every other country), especially if there are EU citizens involved, or the UK will do business in the EU. UK employers must make sure they secure the collection, maintenance, and disposal of employee data under the rules of GDPR if they will hire qualified workers from the EU. Companies should only keep employee information that are crucial to their business operation, because they have a responsibility to protect worker data. UK labor laws in accordance with the GDPR require business owners to explain to their employees about the company’s privacy policy detailing how they collect and use personal data before, during, and after their employment period in the company.
How to Pay Employees in the UK
The Employer of Record is the registered employer of the employees in paper, hence the name Employer of Record. You may say that the EOR is the proxy employer of a foreign firm that hired UK workers and they pay their employees in the UK through the EOR. Foreign companies have two choices when it comes to compensating their UK-based workers, and they can either choose to apply for a business license to operate in the UK, which is time-consuming and costly, or hire qualified workers through an employer of record, which is more affordable and cost-efficient. Small-and medium-sized businesses opt to work with a local EOR often because it allows them to cut back on expenses and doesn’t require a lot of effort.
Social Contributions
In the UK, labor laws also require companies to have their employees paychecks deducted off of certain amount that will go to social contributions and healthcare plans, prior to disbursing funds just like in the United States.
Payslips
UK labor laws decrees that all UK workers have the right to know all the details of their compensation, which is reflected in their payslips or pay check. It must include all deductions, taxes, fees, and correct payment information, as well as, overtime pay rates, night differentials and other relevant items. These payslips can be delivered to the employee via snail mail, email, or both if the employee wishes to do so. It’s a common practice in the UK for companies to pay their employees each month and not bi-monthly or weekly like it is done in the US.
Currency
Both local and foreign companies are required by UK law to pay their employees in British sterling pound (GBP) when they hire qualified workers.
Overtime Pay
The UK government did not give provisions for overtime work and overtime pay in the labor laws. However, employers are allowed to ask their employees to work beyond 40 hours a week should the need arises. Just as long as overtime work will not exceed 48 hours per week per employee and the workers are compensated correctly. There are also no overtime pay for UK workers working during public holidays.
The overtime pay for public holidays will have to be agreed upon by both the employer and his employee before proceeding. The UK government cannot intervene on the worker’s behalf to ask for additional pay for overtime work during legal public holidays. This is why employers must outline the rules for overtime pay in their employment contracts.
The UK government does allow workers to work more than 48 hours each week, provided they sign an agreement with their employer of their intention. This signed agreement does not prevent them from giving up overtime work and they can decide to stop it any time they want, as long as, they give at least a week’s notice to their employer.
What are IR35 Rules in the UK?
Here is where the rules get a bit complicated when companies hire qualified workers whether they be employed under normal circumstances, or they’re self-employed contractors. The IR35 Rules was created to prevent companies and freelancers/contractors from exploiting a specific tax loophole that may allow them to bypass paying income tax and National Insurance contributions like a normal employee would. These rules automatically apply when the right circumstances of employment are occurring.
For example, contractors uses a third party company known as personal service company or PSC and this PSC signs a contract with a business entity to get the contractor onboard and use his services to supplant the company’s needs, then that would trigger Rule IR35. The reason is because the relationship between the employer and the contractor would be the same whether the third party PSC is involved or not.
In 2020, the UK government revised the IR35 rules in order to let the employer bear the weight of the responsibility for correct classification of workers/employees, instead of the contractor. This time, employers need to request a valid reason from contractors working through a PSC prior to hiring them, otherwise they will work directly with the employer. Under certain circumstances, companies that are retaining the contractor’s services may automatically consider contractors as regular employees despite their work arrangement with PSCs.
Common Worker Benefits in the UK
UK labor laws does not clearly state the various statutory benefits for employees, except for paid leave. However, employers often offer enticing compensation and benefits packages similar to what US companies offer when they hire qualified workers, especially when they’re in need of top tier talent(s) for job roles that are difficult to fill.
Paid Time Off (PTO)
UK based workers are entitled to government mandated work leaves at a minimum of 28 days per year. About 20 out of the 28 days are paid leaves, while the remaining 8 are from national legal or public holidays. Often times, employers proactively offer more than 28 leave days as one of the perks of joining their company in order to attract and hire qualified workers. UK labor laws requires employers to allow their employees roll over (carry forward) into the following year unused PTO (paid time off) up to a maximum of 8 days per year. Companies are allowed by the UK government to let their have more days to roll over if they so choose. They can also give cash reimbursements in exchange for these unused PTOs.
Employees who are unable to use their statutory PTO due to them calling in sick and having them instead take a long-term sick leave, or they got pregnant and took a maternity leave, may carry over up to 20 days PTO instead of the standard 8 days. The UK government allows employers to offer their employees unlimited time off as much as their generosity allows; however, they need to track the amount of leaves their employees take and let the government know, as it can affect their tax obligations and credit scores.
Long-Term Sick Leave
In the UK, there are two different sick leaves. One is the short-term illness leave and the other is the long-term sick leave with the latter is determined as a special leave and not similar to the former. This long-term sick leave is also called statutory sick pay. Employees who will file for a sick leave of more than 1 week must give their employers a medical certificate approved by a health professional explaining the reason why they were absent from work for a certain period of time, and it must also entail that they’re physically fit and ready to return to work.
A fixed amount of £95.85 per week is mandated by the UK government for workers on a long-term sick leave to receive, subsidized by the employer, for a period of up to 28 weeks. If their contract dictates that they can receive more than this amount, then the UK government has no problem with it, as long as they don’t receive less. If an employee, while on statutory sick leave, hasn’t recovered from their illness after 28 weeks has passed and their employer are no longer obligated to provide additional sick leave, they can apply for alternative forms of assistance. Workers will keep accumulating PTO while they’re off work under a statutory sick leave, which is a special benefit when employers hire qualified workers in the UK.
Maternity Leave
All female employees in the UK are entitled to 52 weeks of maternity leave from the moment they are hired. UK labor laws requires no minimum amount of time put in for work once they are hired prior to earning a maternity leave. Employers have an obligation to pay for maternity leave to their female employees, and payment amounts vary based on time spent on leave and normal wages. UK labor laws mandates that maternity leave for pregnant employees be divided into 2 parts – the first is the 26 weeks of standard leave and the second is an additional 26 weeks, which totals 52 weeks. The UK government also gives pregnant employees the right to take PTO for antenatal care. After they’ve taken their maternity leave, female employees must give their employers at least 8 weeks’ notice prior to returning to work.
Paternity Leave
Male husbands, live-in partners and even non-male partners of female pregnant employees may qualify for paternity leave. However, there are conditions before an employee can qualify for the paternity leave and they are:
- The partner must be the husband of the pregnant employee
- The partner must be the father of the unborn child (whether married or not)
- The partner must be the current live-in partner of the employee giving birth (if not married)
- The partner must be the person adopting the child
- Must be the child’s intended parent if planning to care for the child after a surrogacy
It’s important to remember that employees who take time off from work just to attend adoption appointments will be denied the paternity leave. Under the UK labor laws, paternity leave cannot be taken prior to the child’s birth, and must only be used within the first year of the child’s birth. Employees are allowed to take 1 – 2 consecutive weeks of paternity leave. Paternity leave differs from maternity leave, as it requires employees to contribute 26 consistent weeks of work prior to qualification, which would be the 15th week before the baby’s expected date of birth will be due.
Shared Parental Leave
Shared parental leave is also allowed by the UK government in various circumstances. Parents are encouraged to use this leave during the first year of the child’s birth. Couples are allowed to share a leave for up to 50 weeks, but only 37 of those weeks are paid. Shared parental leave may be taken in blocks, all at once, together as a couple, or separately.
Private Health Insurance
The UK government ensures that every citizen and non-citizen residents gets the basic government health insurance package. However, once they are employed in a company, they also get private health insurance, which is provided by their employer as an added benefit, to attract top talents to their company. This is a corporate tactic when they want to hire qualified workers and it usually works. Employers may choose to offer a pre-packaged health insurance plan or HMO (health management organization), or let their workers decide what type of plan they’ll opt for.
Additional Insurance Plans
There are cases where employers in the UK offer additional insurance plans beyond that what’s typically covered by the NHS or private health plans. This include;
- Vision insurance
- Dental care
- Fertility support
- Disability support
- Other insurance types
When workers see this additional benefits attached to what the company offers, they become very excited at the prospect of getting more in exchange for their services and become more productive at work.
Pension Schemes
UK labor laws require employers to include a pension scheme for their employees, which is necessary for when they’ll retire. There are mandatory contribution rates and minimums when they hire qualified workers.
Retirement Plans and Pensions Schemes in the UK
The UK has a variety of retirement plans that are easily accessible for workers, and a lot of them fall under the scope of pension schemes. Pension schemes can be made through company initiated plans, personal investments, and other types of related schemes.
Pension Scheme Enrollment Requirements
When UK employers hire qualified workers, the workers usually automatically get enrolled in the company pension schemes. UK labor laws explicitly prohibits employers from intimidating, encouraging, or otherwise attempt to convince employees to opt out of their government mandated pension benefit. The requirements for pension schemes enrollment are;
- Employees must be workers in the company and not self-employed contractors.
- Must be between 22 and 66 years of age.
- Must be earning at least £10,000 per year.
Employees not enrolled automatically can opt in the pension schemes. Employers are allowed to postpone the automatic enrollment of an employee for up to 3 months. However, they must notify the worker within 6 weeks + 1 day prior to the date that they become eligible for enrollment, and they must also include in the written notice the specific reason why they are postponing the worker’s enrollment.
Employers must also inform the pensions regulator about the postponement in order to avoid being fined and penalized for not following proper procedures. They are also required by UK labor laws to submit a declaration of compliance within 5 months after enrolling their new employee automatically.
Types of UK Pension Schemes
All employee contributions to their individual pension schemes must be before tax deductions. Contributions are shared between employers (at 3% of total employee earnings) and employees, which must be at least 5% of their total earnings. There are 2 primary categories for private pension schemes and they are;
- Defined contribution schemes
- Defined benefit schemes
Defined Contribution Schemes
Pension plans that grow based on how much a person makes monetary contribution to it are called defined contribution schemes. They are sometimes called “money purchase” or personal pension schemes, and are made with a combined contributions of the employers and employees into a single pot. Under UK labor laws, workers are allowed to withdraw 25% of a defined contribution scheme even if they don’t pay taxes after waiting for a certain period of time.
Defined Benefit Schemes
Defined benefit schemes are basically pensions provided by employers to their employees. They are also referred to as “final salary” or “career average” pension schemes. Unlike the defined contribution schemes, defined benefit schemes are inconsequential to the amount of money that employees or employers contribute, but on the specified rules set by the insurance company. This include the length of time an employee has worked in the company, their salary and other items in their employment. A fixed amount is paid out to workers each year once they retire and the defined benefit pension takes effect.
How to Terminate an Employee in the UK
In the UK, labor laws states that employees who will go into the third year of their employment will gain a new set of rights, although initially they have no protection against termination during the first 2 years of their employment. This makes it harder for employers to terminate them; however, if the employer wants to terminate them, then he must provide a “potentially fair reason,” which has something to do with their conduct, capability or a different merit for termination. While employers hire qualified workers in good faith, not all employees are the same and eventually one or two will eventually show their bad side and unprofessional attitude at work.
Notice of Termination
A notice of termination is only given to employees who are not fired for a substantial reason, because they are entitled to it.
The minimum notice periods are:
- One week if the worker has been with the company for more than a month
- Two weeks if the employee has been with the company for 2 years now
- One month if the worker has been with the company for 4 years now
- One week times the number of years the employee has had a continuous employment in the company between 5 – 11 years
- Three months’ notice after 12 years of employment
UK labor laws prohibits employers from giving their workers more than 12 weeks of notice when they desire to end their employment.
Severance Pay
There are no mandated severance pay for terminated employees under the UK labor laws, except for those made redundant or laid off for financial reasons. However, companies in the UK are generous enough to offer severance packages to employees leaving the company. Once an employee has continuously worked for an employer for at least 2 years, then they are entitled to the unfair dismissal rights.
If an employer wants to terminate his employee who has been working in the company for at least 2 years now, then he must provide a fair and substantial reason for doing so. Unfairly terminating employees will give them the right to take the company to court and demand reparations for lost wages, which may amount to £86,444 or less than their annual salary. The employee facing termination notice must seek independent legal advice when the company arranges for them to waive any grievances against the company in exchange for a severance pay package.
Probationary Periods
Foreign companies are not required by UK labor laws to use probationary periods to assess their workers, but most companies choose to do it. When employers hire qualified workers, they usually place their employment status as “probationary,” and in the UK that usually last between 30 days to a few months. The immediate termination of an employee under the probationary period even without prior notice is allowed by the UK government, as long as the employer notifies the employee in writing.
Non-compete Agreements
The UK government allows and enforce all non-compete agreements; however, companies need to be careful with what they put in the contracts because all post-termination restrictions are only effective for up to 12 months. Anything beyond that will no longer be the responsibility of the employee.
Protected Conversations and Settlement Discussions in the UK
Workers who perform below what is expected of them based on certain criteria may be terminated before the end of their probationary period, provided the employer offers them a mutually accepted severance package. This is called “easing up the split” between the employer and underperforming employee, which prevents the company from facing any lawsuits. The settlement discussions content are generally not accepted in a UK court as evidence, unless the employee claims that their employer may have committed gross misconduct, such as discrimination based on race, age, gender, etc.
Performance Management in the UK
All over the world, companies always reward and discipline their employees based on their performance at work is a common practice. But in the UK performance management is a bit different and there are specific rules that employers must follow.
In the UK, employers are not allowed to terminate an employee for one poor work performance against his length of service in the company, as that would trigger their unfair dismissal rights and get the company into trouble. Terminating an employee based on his/her performance should only be done if the employer has provided clear documentation of;
- Written warnings
- Attempts to support the employee
- Additional training and improvement plan
However, if the employee has committed gross negligence, then the requirements above are no longer necessary. But this is rarely the case in most employee dismissal.
Employees who show performance improvement after undergoing a performance improvement plan and then relapses again after the probationary period are allowed to be given another chance under an extended probationary period for repeating underperformance mistakes. UK employment courts are not keen on looking at improvement plans for underperforming employees, which last between a year or more for their first offense. However, employees having the same issues at work over and over again even after going through multiple improvement plans may be required to show improvement for a longer period of time.
UK employers don’t have to accommodate workers who have trouble performing the basic duties of their jobs with the exception of protected disability accommodations. Managers, out of the kindness of their hearts, may feel obligated to lessen the workloads of older employees, less tech-savvy employees, and other non-protected people. But this may not be a good business practice, as it can alienate other employees who may feel that they are being discriminated against and will most likely go to court to sue the company on unfair practices. It’s best to hire qualified workers to fill ideal and critical job roles in order to have a competent workforce amidst a highly competitive corporate world.
