For some time, the balance of employment rights in the UK has fallen squarely in favour of employees. The introduction of employment tribunal fees has resulted in a significant drop in claims, meaning that employers would appear to be less at risk of claims for technical breaches of the law. Nevertheless, most businesses are still very conscientious about wanting to be seen to be "good employers", but if not, the bottom line remains that, provided they are prepared to pay sufficient compensation, employers in the UK can usually achieve what they wish.
Issues arising on hiring individuals
Any non-EEA national seeking entry or permission to remain in the UK for the purpose of employment may need to apply under Tier 2 of the Points Based System via an approved UK Visas and Immigration. Pending Brexit related negotiations, EEA nationals (aside from Croatians) have the right to enter, remain in and work in the UK without a work permit.
Employment structuring and documentation
The standard type of employment contract in the UK is an "open-ended" contract terminable on notice (subject to the protection which the law provides on unfair dismissal). A contract of employment need not be in writing and may be partly written and partly verbal. Although the contract itself need not be in writing, employees who have been employed for one month or more must be given a statement containing certain terms and conditions of employment within two months of commencing work with an employer.
The most common employment relationship is that of full time permanent employment but an increasing number of staff have flexible working arrangements. This may include working part time, through fixed term contracts or through an agency. UK law gives special protection for these types of workers. Zero hours contracts are becoming more common in the UK. New regulations prohibit the inclusion of exclusivity clauses in such contracts. There are also special rules relating to apprentices, trainees and young persons.
Issues arising during the employment relationship
Wages, annual leave and working time
Employers must pay employees and workers at least the national minimum wage. There are four hourly rates for the national minimum wage, the top rate currently being GBP 7.05 (for workers aged 21+). The National Living Wage, for employees aged 25 and over is currently GBP 7.50 per hour. Employees and workers are entitled to 5.6 weeks' paid annual leave (pro-rated for part-timers). Workers may not work, on average, for more than 48 hours per week, but can agree to contract out of this working time limit.
Agency workers are entitled: (1) from day one of an assignment to the same rights as comparable permanent employees in relation to access to shared facilities and job vacancies; and (2) after 12 weeks of an assignment to additional rights - in particular the same basic working and employment conditions as comparable permanent employees, including those relating to pay, annual leave and working time and rest periods.
Pregnancy rights include health and safety protection and the right to reasonable paid time off for ante-natal care. Family rights to leave and pay have been subject to major reform in Great Britain with the introduction of shared parental leave and pay which applies to all qualifying working parents of children. Whilst the default position of 52 weeks' maternity/adoption leave for employed mothers/ adopters remains, those employees are entitled to give up their leave and pay and share it with the father/their partner (i.e. whoever shares the main caring responsibility for the child at the date of birth/adoption). Employees with 26 weeks' service also qualify for Statutory Maternity/Adoption Pay which is calculated as follows (1) six weeks at 90% of salary; and (2) 33 weeks currently at a flat rate of GBP 140.98, or 90% of salary if that is lower. ShPP follows the same flat rate for up to 37 weeks. Employers with enhanced maternity pay arrangements need to consider how to treat employees on shared parental leave.
Fathers/co-adopters continuously employed for 26 weeks are entitled to: (1) two weeks' Ordinary Paternity Leave; and (2) two weeks' Statutory Paternity Pay currently at GBP 140.98, or 90% of salary if that is lower.
All employees continuously employed for 26 weeks have the right to request flexible working, i.e. to change the hours or times they work or their work location, irrespective of their caring responsibilities. Although compensation for non compliance, or for a decision based on incorrect facts, is at eight weeks' pay, victimisation, sex discrimination and unfair dismissal claims may also be brought following an employer's refusal to grant the employee's request.
It is unlawful to refuse to employ a person because they are a member or a trade union. In addition, the dismissal of an employee on union grounds will be an automatically unfair dismissal (see "Terminating Employment" below). A strike, work to rule or other industrial action need not be called by a union and non-union members can participate. The action that employers can take against employees as a result of industrial action is limited. If employees are on strike, the employer does not need to pay them for the times they are not working. However, they will usually be entitled to full pay when they take industrial action short of a strike. The Government has introduced new legislation (the Trade Union Act 2016) specifying the proportion of union members who must vote in favour of industrial action. For industrial action to be lawful, 50% of those members participating in the ballot must vote in favour of industrial action. There is an additional threshold for ballots in "important public services".
Tax and social insurance
The UK has a comprehensive social security system, funded from general taxation and from National Insurance Contributions. The social security system provides state benefits to cover maternity/paternity, childcare, disability and carer matters. It also administers retirement pensions. State benefits can be contractually supplemented by employers. The National Insurance Fund aims to provide subsistence level benefits to all those in need.
Employers have to ensure that workers in the UK, between the ages of 22 and state pension age, and earning over the earnings threshold (currently GBP 10,000) are automatically enrolled into a qualifying pension scheme to which the employer must contribute. The duty is being phased in according to the size of the employer and will not be fully in force until 2018.
Employers are under an obligation to collect income tax at source from employment income, pensions and taxable state benefits under the Pay As You Earn (PAYE) system. Employed earners and their employers must also pay National Insurance Contributions. Various contributions are required to be made in respect of all UK employees. Class 1 contributions are payable in respect of earnings by both employer and employee.
Issues arising on termination of the employment relationship
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) applies to employees when either (1) a business or asset is transferred from one entity to another; or (2) there is a change of identity in an entity providing a service (e.g. outsourcing).
The effect of TUPE is that all employees "assigned" to the economic entity or activity will transfer In addition, the transferor's rights, powers, duties and liabilities under the employment contracts of those employees who are transferring, transfer to the transferee. The transferor and transferee have a duty to inform and consult with employee representatives of "affected employees" about the facts, implications, etc. of the transfer. Employers that breach this duty may be liable for up to 13 weeks' pay for each "affected employee". Finally, subject to certain exceptions such as redundancy or change of location, dismissals are automatically unfair if the sole or principal reason for dismissal is the TUPE transfer.
Subject to certain exceptions, unfair dismissal claims can be brought by employees who have been continuously employed for two+ years. Provided there is no discrimination, employers will not be liable for dismissals where: (1) they follow a fair procedure; and (2) the reason for dismissal is fair, eg redundancy, capability, misconduct.
An unfair dismissal award, which is currently capped at GBP 95,211, is made up of (1) a basic award (calculated according to the employee's age, length of service and pay) - currently capped at GBP 14,670; and (2) a compensatory award (a "just and equitable" amount) - currently capped at the lower of one year's gross pay (excluding pension contributions, benefits in kind and discretionary bonuses) and the overall cap of GBP 80,541.
A redundancy situation arises where the business, workplace or job disappears, or fewer employees are needed. For a fair redundancy, the employer must show: (1) the reason for dismissal is redundancy; (2) it is reasonable to dismiss the employee for redundancy; and (3) a fair procedure was followed.
There must be fair selection of employees for redundancy and genuine consultation. If an employer proposes to dismiss as redundant a total of 20+ employees across any sites in the UK within a 90 day period, it must also follow a collective consultation procedure involving a minimum consultation period of 30/45 days, depending on the number
of redundant employees, in addition to any individual redundancy procedure. Employers that breach these collective obligations may be liable for protective awards of up to 90 days' pay for each affected employee. Employees with two+ years' service have the right to a statutory redundancy payment currently capped at GBP 14,670.
Lastly, it is unlawful to dismiss employees, or to subject employees or workers to a detriment, if they disclose information with a reasonable belief in its truth, about certain types of wrongdoing by the employer. The awards in whistleblowing claims are uncapped and are assessed on a similar basis to discrimination claims.
Employees and others have the right not to be discriminated against because of age, disability, gender-reassignment, marriage or civil partner status, pregnancy/maternity, race, religion/belief, sex and sexual orientation (Protected Characteristics) from the job application stage onwards.
Discrimination/victimisation/harassment relating to any of the Protected Characteristics is prohibited at any time during the employment relationship. Claims can be brought by all employees, ex-employees, job applicants, contract workers and agency workers -there is no requirement for a period of continuous service. The award is made up of (1) a compensatory award - uncapped for past and future financial losses and career loss; and (2) an injury to feelings award - there are three guideline bands, with the lower and upper bands ranging from GBP 660-6,600 and GBP 19,800-33,000 respectively, depending on the seriousness of the case, and subject to tribunals applying their own inflationary increases to these bands.
Men and women have the right to be paid the same for the same, or equivalent, work. Where they are paid at different rates, an employee can bring an equal pay claim and the employer must prove that the reason for this is not gender related, or be able to objectively justify this. Any equal pay award will be made up of (1) compensation of arrears of pay plus interest, limited to six years; and (2) revised contractual terms, including remuneration terms, so that they are the same as that of the person of the opposite sex doing the same work.
Published in collaboration with L&E Global: an alliance of employers’ counsel worldwide
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