UK employment law is constantly developing and it has been challenging for employers to keep up with the changes in recent years. All employers in the UK, no matter how big or small, are required to comply with these laws or face financial penalties and reputational loss. These laws apply to all employees in the UK regardless of by whom they are employed or paid. It is important therefore that UK employers keep up to date with these developments and take careful legal advice, in particular, before hiring or firing.
Employees in the UK have a number of rights which have no equivalent in the United States. This article provides a brief summary of some of the basic employment rights in the UK.
Commencement of the Employment Relationship: Employment Contracts
All employees in the UK (regardless of their working hours) have the right to receive a written statement of their terms of employment within two months of starting work. Employers may be liable to a fine of between two and four weeks’ gross pay if employees are not given such a statement, which is typically contained in an employment contract. An employment contract must at least contain the following terms:
- Name of employer and employee;
- Place of work;
- Hours of work;
- Leave entitlement;
- Sickness absence and sick pay entitlements;
- Length of notice required to terminate the employment;
- Disciplinary and grievance procedures;.
- Pension benefits;
- Whether a collective agreement applies to the employment.
UK immigration law has undergone many reforms recently including the introduction of a quota system to reduce the number of foreign workers in the UK. There is currently a tiered points-based system which controls economic migration to the UK. The most common tier used by employers seeking to employ foreign workers in the UK is Tier 2 of the points-based system. Non-EEA (European Economic Association) nationals must normally seek entry clearance or authorisation to work in the UK before any employment can be offered to them (for both paid and charitable work). In addition, both the UK and overseas employers must have obtained “sponsor licenses” from the Home Office before they can employ any non-EEA nationals, who are also required to apply for individual Tier 2 work visas before they can legally start working for the employers in the UK.
Overseas employees who wish to enter the UK for the purpose of attending occasional meetings, trainings, seminars and conferences are in general permitted to do so without the need for a work permit (and in the case of US citizens, without a visa) provided that they are not engaged in the provision of goods and services whilst in the UK and provided that their visits are intended for only prescribed purposes under the immigration law. Careful legal advice needs to be taken by any employer seeking to employ a non-EEA national and by any individual seeking to enter the UK other than as a tourist. The penalties for breaching UK immigration rules are serious. An employer can be fined up to £20,000 (approximately 29,800 US Dollars) for employing each illegal worker by the UK Government. The UK Government has power to suspend or remove the sponsor licenses from the relevant employers which would effectively mean that they can no longer employ foreign workers in the UK.
During the Employment Relationship
National Minimum Wage
All employers irrespective of their size must pay their UK workers at least the National Minimum Wage (NMW). The minimum wage rate depends on a worker’s age and whether he/she is an apprentice. The current NMW for a worker aged 21 or over is £6.50 per hour. This rate is subject to increase every year. The Government has the power to name publicly all employers who ignore the NMW. It also can send a notice of underpayment which sets out the arrears of NMW to be paid by the employer together with a requirement for the employer to pay a financial penalty. The maximum penalty is £20,000 (approximately 29,800 US Dollars).
Minimum Annual Leave Entitlement
All UK employees are entitled to 5.6 weeks’ paid annual leave (i.e. 28 days for a full-time employee), which can include public and bank holidays, of which there are approximately eight a year in the UK.
Maximum Working Time
Most employees cannot be required to work more than an average of 48 hours a week unless they expressly agree otherwise with their employer (via an opt-out agreement). Senior employees who have autonomous decision making powers however are not generally subject to this limit. Employees under the age of 18 cannot work more than 40 hours in any week, and cannot sign an opt-out agreement.
Statutory Sick Pay (SSP)
There is no statutory limit on the amount of time that employees may take off due to illness or injury. However, an employee’s entitlement to SSP ceases after he/she has been absent for sickness for more than 28 weeks in any three-year period. The rate of SSP increases each year and is £87.55 a week for the 2014/15 tax year.
Employees have the right to join a trade union. Employers must not refuse to recruit a person because he/she is or was a trade union member/official. It is unlawful for employers, employment agencies and others to compile, supply or use a blacklist of trade union members or activists for discriminatory purposes such as employment vetting. It is deemed an “automatically unfair dismissal” under law if an employee is dismissed on grounds of trade union membership.
Employees have the right not to be subjected to discrimination because of age, disability, gender reassignment, marriage or civil partnership, pregnancy or maternity, race, religion or belief, sex or sexual orientation. These are known as “protected characteristics”. Compensation for breach of the discrimination laws is not subject to any cap.
There are two types of discrimination (i.e. direct and indirect) in the UK. An employee claiming direct discrimination must show that he/she has been treated less favourably because of a protected characteristic. Indirect discrimination is concerned with acts, decisions or policies (broadly speaking) which are not intended to treat anyone less favourably, but which in practice have the effect of disadvantaging a group of people with a particular protected characteristic. A classic example is an employer requiring an employee to work full time. This requirement could disadvantage women as a group, since women in society generally bear a greater part of domestic and childcare responsibilities than men and are more likely to need to work part time. Unless the employer could objectively justify the need for a full-time worker to do the job, the requirement might be found to be indirectly discriminatory against a woman who has childcare responsibilities.
Work and Family
From 30 June 2014, all employees with 26 weeks’ continuous service have the statutory right to request flexible working (regardless of whether they have childcare responsibilities). The employer must deal with an application for flexible working in a reasonable manner. An employer can only refuse a request for flexible working for one (or more) of the eight reasons prescribed in law1. An unreasonable refusal to grant a flexible working request may result in a discrimination claim.
Pregnant employees are entitled to special health and safety protection. They are also entitled to paid time off for antenatal care.
For children who are born or adopted on or after 5 April 2015, new shared parental leave rules will apply. Essentially, a mother/adopter who is entitled to statutory maternity/adoption leave and benefits may give up the relevant entitlement so that the child’s other parent/adoptive parent may share the balance of the leave and benefits.
Shared parental leave is designed to give parents more flexibility in how to share the care of their child in the first year following birth or adoption. Employees have discretion as to whether to join this new scheme. If the parents choose not to joint this scheme, the 52 weeks of maternity/adoption leave entitlement (39 weeks paid) for the mother/primary adopter still remains. The child’s other parent will also still be entitled to two weeks’ ordinary paternity pay and leave (two weeks paid). If the parents choose to join this scheme, the mother or primary adopter must still take at least 2 weeks of maternity leave immediately after birth or adoption, but after that the parents have the opportunity to share up to 50 weeks of leave and up to 37 weeks of pay. The intention is that this will enable mothers and primary adopters to return to work before the end of their leave without sacrificing the rest of the leave that would otherwise be available to them.
Tax and National Insurance
In the UK, the employer is responsible for deducting both appropriate income tax and primary National Insurance contribution from the salaries of all employees, under what is known as the Pay As You Earn Scheme (PAYE).
The current standard primary national insurance contribution is 12% on weekly earnings between £155 and £815 and 2% on weekly earnings above that limit (the earnings limits are scaled up where the earnings period exceeds a week). The employer is also responsible for making employer National Insurance contributions (known as secondary contributions) on behalf of employees, the level of which is also linked to the level of the employee’s earnings. The current secondary contribution is 13.8% of gross salary.
Auto-enrolment pension duties are being phased in over a period of five-and-a-half years since 1 October 2012 for all employers, according to their payroll size. Once an employer comes into scope for the new duties, it will be required to auto-enrol its eligible workers - referred to as “jobholders” - in a pension scheme meeting specific standards, unless the jobholders are already active members of the employer’s qualifying pension scheme.
The minimum contributions that employers must pay into employee pension scheme are shown in the table below – they are currently a total contribution of 2% of base salary with at least 1% employer contribution of basic salary in general.
Minimum contributions are being introduced gradually over time.
Click here to view table.
Transfer of Business
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (TUPE), which implement a European Directive, ensure that when there is a transfer of an undertaking (typically when a business is sold and where services are contracted out), employees’ rights are protected. In particular, where there is a transfer of an undertaking or a change in the provision of services, the following apply:
- All employees in the transferring business transfer to the transferee employer with their terms and conditions of employment intact;
- The transferee employer automatically inherits all rights, duties, powers and liabilities for those employees and “steps into the shoes” of the transferor;
- Employees can refuse to be transferred to the transferee employer, but in that case their employment comes to an end by operation of law and no compensation is due (this does not affect the possibility of claims for constructive dismissal);
- A dismissal connected with a TUPE transfer is automatically unfair unless it is for an economic, technical or organisational reason entailing changes in the workforce;
- The transferor employer must provide Employee Liability Information to the transferee employer at least 28 days before the transfer;
- The transferor employer must give information to and consult with trade unions or, if these are not present, with appropriate representatives of employees prior to the transfer of an undertaking; and
- The transferor employer is under a duty to arrange for the election of employee representatives if there are none in place, for the purposes of consultation (assuming there are no trade union representatives).
Ending the Employment Relationship
There is no such thing as employment “at will” in the UK. Employees with over two years’ service have a right not to be unfairly dismissed (the qualifying period for employees to claim unfair dismissal increased from one to two years on 6 April 2012. The increase applies only to employees whose employment with their employer began on or after 6 April 2012).
The dismissal of an employee will only be potentially fair if it relates to:
- The capability of the employee;
- The employee’s conduct;
- The contravention of an enactment; or
- Some other substantial reason.
Even if an employer has a potentially fair reason for dismissing an employee, a dismissal will still be unfair if the employer has not followed a fair procedure. The Tribunal will examine if the reason provided for termination is genuine and if the employer has carried out a fair procedure.
The usual remedy available to an employee is an unfair dismissal award which consists of a basic award and a compensatory award. The basic award is calculated using a formula based on weekly pay, length of service and age and is subject to a maximum of £14,250. The maximum compensatory award is the lower of the numerical cap (£78,335) or 52 weeks’ pay (in some special cases the compensatory award is unlimited). As an alternative to financial compensation, the employee may claim for reinstatement or re-engagement.
Entitlement to Notice
After one month’s service, employees are entitled to notice from their employer of the termination of their employment. The right is to have a statutory minimum of one week’s notice, rising by one week for each year of service up to a maximum of 12 weeks.
An employer may only dismiss an employee on grounds of redundancy where there is a true redundancy situation in accordance with the statutory definition. This is where the requirements of the business for employees to carry out work of a particular kind or in a particular place have ceased, diminished or are expected to do so. This is usually a situation where:
- The employer no longer exists;
- The place of work is closed; or
- There is a reduced need for employees to carry out work of a particular kind.
In order to avoid unfair dismissal claims, redundancies must be carried out according to a fair procedure. Any employee over the age of 18 who has been employed for two years or more, who is dismissed by reason of redundancy, will be eligible for a statutory redundancy payment (and may also be eligible for a contractual redundancy payment).
There are also additional consultation requirements and timetables imposed on an employer who wishes to make collective redundancies (involving 20 or more employees). For example, at least 30 days’ notice must be given for redundancies of 20-99 employees and 45 days’ notice must be given for 100 or more redundancies.
This Guide is intended to provide a summary overview only of some of the significant employment rights in the UK and should not be relied upon for the purposes of legal advice.