The employment contract

A written employment contract is not required but this is usual to ensure that both parties are clear about the terms of the employment arrangement. If there is no written contract then a "Particulars of Employment" should be provided within two months of the employee starting work. The Particulars of Employment document sets out the main terms and conditions of the employment but is only evidence of a contract, not a contract itself.

There are certain terms implied into all employment contracts. For example, the employee must exercise reasonable care and skill, carry out reasonable orders and not divulge confidential information or work for competitors.

Probationary periods following recruitment are common in the UK and typically last for six months. The main feature of the probationary period is that the employee will not normally be entitled to claim unfair dismissal if the employment is terminated as the employee requires two years' service (see 'Notice' below) to bring such a claim. If the worker suffers discrimination during the probationary period (including the reason for ending the employment) they can take action against their employer as there is no qualifying period required for such a claim.

Fixed term contracts are permitted in the UK. Employees who are on successive fixed-term contracts for a period of four years or more will become permanent employees, unless the employer can justify the use of a further fixed-term contract. The expiry of a fixed-term contract is a dismissal, so, subject to qualifying service, an employee can claim for unfair dismissal (see below).

Notice

Employees are entitled to minimum statutory notice under the Employment Rights Act (ERA). For employees with one month to two years' service the statutory minimum notice period is one week. For employees with more than two years' service statutory minimum notice is one week per completed year of service up to a maximum of 12 weeks. The contract can provide for more but not less notice. It can also provide a payment in lieu of notice (PILON) clause, which allows employers to pay employees instead of requiring them to work their notice.

Working hours & Part-time workers

Average working hours in the UK are approximately 38 per week. The statutory maximum under the Working Time Regulations 1998 is an average of 48 working hours per week over a 17 week period although employees can sign an 'opt-out' and agree to work longer hours. The opt-out can be withdrawn at any time by giving no less than seven days' notice, unless the opt-out agreement provides for longer notice (up to a maximum of three months). Employees with 'unmeasured' working time (normally senior directors) are exempt from the 48 hour week. Subject to a number of exceptions, employees are also entitled to rest breaks of 20 minutes when working more than six hours, 11 hours' uninterrupted rest per day and 24 hours' uninterrupted rest per week.

Part-time workers must not be subjected to less favourable treatment than full-time workers on the basis of their part-time status, and where possible any benefits available to full-time workers should be pro-rated for part-time workers.

Employee rights - minimum wage, holiday, sickness & maternity pay

Workers are entitled to a minimum hourly rate of pay based on their age. The minimum wage rates are set by the UK Government and available on its website.

Employees are also entitled under the Working Time Regulations 1998 to a minimum of 28 days' paid holiday a year (pro-rated for part time workers). This can include public holidays, of which there are generally eight per year in England.

Employees who are off work due to sickness for four or more consecutive work days may be entitled to statutory sick pay (SSP). The employer can require proof of incapacity. SSP is payable for up to a maximum of 28 weeks for any one period of incapacity per three years.

All women are entitled to maternity leave and women will be entitled to maternity pay if continuously employed for 26 weeks at the end of the 15th week before the expected week of childbirth. There are complex maternity pay qualifying criteria which we will not go into in detail in this briefing. Up to 52 weeks of maternity leave can be taken (39 weeks are paid), with two weeks' compulsory maternity leave after the birth of the baby.

Fathers are also eligible for paternity leave of two weeks to be taken in a continuous period within 56 days of the child's birth. Statutory paternity pay is also available for up to two weeks. After one year's service, parents have the right to take a total of 18 weeks' unpaid leave to look after children under five. Statutory adoption leave and pay is also available to employees who adopt a child. The provisions for these family-focussed rights are complex and currently being reviewed by the government.

Employees with 26 weeks' service also have the right to request flexible working to care for children up to the age of 17, disabled children up to the age of 18 or an adult relative/dependant over the age of 18. The employer is under a duty to consider each request and may only refuse a flexible working request for a limited number of business reasons. Refusals may lead to employment tribunal claims and discrimination claims.

Transfers of business

The provisions of the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) apply to many mergers and acquisitions in the UK. This is a complex area and legal advice should be sought at an early stage on the employment law implications of any transfer.

TUPE provides that responsibility for the employees working in a purchased business will transfer on the same terms and conditions (excluding some pensions provisions) to the new owner.

Workplace Pensions

Employers in the UK will soon be required to automatically enroll eligible workers into a qualifying workplace pension scheme (Pensions Act 2008). Depending on the size of the UK workforce employers have "staging dates" for the enrolment of their staff, with the largest employers starting in October 2012 and smaller businesses following in descending order of size (see the UK Pensions Regulator's website to check the staging dates).

Ensuring access to a qualifying pension scheme, and assessing your workforce to see which members are eligible to be automatically enrolled is a complex process involving payroll, Human Resources and other departments, so detailed legal advice should be sought at an early stage. Eligible workers do have the right to "opt out" of their workplace pension, but if they do not, then the employer is obliged to match their contributions up to a minimum rate which currently stands at 4% of a worker's qualifying earnings (this minimum rate is set by the government and is intended to rise to 8% by 2017). Failure to comply with the duty to enrol eligible workers or any attempt by the employer to coerce workers into opting out could result in a fine from the Pensions Regulator and the employer will be made to enrol the workers anyway and pay for any lost contributions.

For more information and a video on workplace pensions visit our dedicated site.

Conclusion

The UK presents exciting opportunities to Chinese investors, but companies looking to employ workers in the UK need to understand and comply with the extensive employment rights and the framework outlined above. Therefore seeking legal advice before employing workers in the UK is essential.