Employer of Record in Uk: Hire, Manage, and Pay Talent Seamlessly
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Employment Norms in the United Kingdom
The United Kingdom is the 6th largest economy in the world. It has many economic opportunities and a very high standard of living. Since Brexit, some employers might need help navigating the hiring process. In such circumstances, engaging with an Employer of Record (EOR) services is crucial.
General Information:
- The currency used in the United Kingdom is the Pound Sterling.
- The capital of the United Kingdom is London.
- English is the official language of the United Kingdom.
- As of 2022, the GDP of the United Kingdom was 3198.47 billion USD.
Table of Contents
- Agreements
- Onboarding Process
- Visa
- Minimum Wage
- Payroll Cycle
- Annual Bonus
- Health Benefits
- Working hours and overtime
- Leaves
- Social Security
- Taxes for Employers
- Taxes for Employees
- Probation
- Termination
- Severance Pay
- Employees or Contractors
- Final Words
AgreementsOnboarding ProcessVisaMinimum WagePayroll CycleAnnual BonusHealth BenefitsWorking hours and overtimeLeavesSocial SecurityTaxes for EmployersTaxes for EmployeesProbationTerminationSeverance PayEmployees or ContractorsFinal Words
Agreements in Uk
It is mandatory in the United Kingdom to have a contract dealing with employment clauses when hiring personnel.
The written contract must contain the following details:
- Type of employment: full-time, part-time, or consultant
- Duties to be performed by the employee
- Salary compensation for the employee in British pounds only
- Benefits apart from the salary, such as health insurance and time off
- Details of leaves available, including optional ones
- Details of grievance forum: how it can help and where the complaints can be filed
- Disciplinary procedures
- Terms of termination of employment, including notice period and severance pay
- Confidential information such as the employee's legal background, address, and national details
- Terms of intellectual property such as who owns the IP right
Onboarding Process in Uk
- The onboarding process is a detailed plan for the employee joining the new organization. It can take 1.5 to 12 months.
- Documents required during onboarding:
- Social security number
- Passport/ID of the employee
- Educational Qualification
- Personal information like name, address, health statistics
- Tax code
- National insurance number and eligibility
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The UK work visa is based on a Points Based System (PBS) and has five tiers.
Who can apply
- Tier 1Outside European Union (EU) and European Economic Area (EEA)
- Highly skilled employees
- Investors
- Entrepreneurs
- Tier 2
- Skilled employees outside EEA
- Professional sportspeople
- Tier 3Outside EU
- Low-skilled employees
- Temporary workers
- Tier 4Outside EEA
- Students (16 years and above)
- Tier 5(has 6 sub-tiers)
- Temporary employees
The UK work visa requires sponsorship by employers or a licensed incorporated business entity. Additionally, non-EU workers require a certificate of sponsorship from the UK government to attain work permits.
In the UK, third-party sponsorship is not allowed.
Minimum Wage in Uk
In the United Kingdom, the minimum wage is hourly and based on the age of the employee. It is revised annually by the government.
| Apprentice | Under 18 years | 18-20 years | 21-22 years | 23 and above | |
|---|---|---|---|---|---|
| Current Rate (Since 1 April 2022) | £4.81 | £4.81 | £6.83 | £9.1 | £9.50 |
| 2023 (to be in effect from 1 April 2023) | £5.28 | £5.28 | £7.49 | £10.18 | £10.42 |
Payroll Cycle in Uk
The United Kingdom follows a monthly payroll cycle.
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There is no statutory requirement for bonuses in the UK. It depends on the discretion of the corporate policy.
Health Benefits in Uk
- In the United Kingdom, the employee's health coverage is contributed from National Insurance Contribution (NIC) fund.
- It is the employer's responsibility to file NIC through the PAYE system.
Working hours and overtime in Uk
- The working hours in the UK are 40 hours, spread over 5 days (Monday to Friday).
- There is an accepted cultural norm that these 40 hours are flexible, but they differ from industry to industry.
- Employees can choose to work for longer hours.
Overtime is allowed only if it is permitted in the written contract. It is usually unpaid.
Leaves in Uk
Statutory Sick Leaves (SSL)
- SSL leaves are granted to employees earning a minimum of £120 per week.
- The validity of SSL leaves is up to 28 weeks.
- SSL is usually worth £96.35. It is paid by the employer and not the government.
Maternity and Paternity leaves
- Mothers are entitled to 52 weeks of maternity weeks. The first 26 weeks are called ordinary maternity leave, and the next 26 weeks are called additional maternity leave.
- Mothers are mandated by law to take at least 2 weeks off after the birth of their child.
- Even fathers can attain paternity leaves for up to 2 weeks.
Holidays
- Full-time employees are granted paid holidays for either 5.6 weeks or 28 days.
- Part-time employees can also have paid holidays, but they might be less than 28 days.
- In case the employee has not utilized all the paid holidays, they can carry forward 8 holidays to next year.
Public holidays for the year 2024 are the following:
- January 1 - New Year's Day
- March 29 - Good Friday
- April 1 - Easter Monday
- May 6 - Early May Bank Holiday / Labour Day
- May 8 - Bank Holiday for the Coronation of King Charles III
- May 27 - Spring Bank Holiday
- August 26 - Summer Bank Holiday
- December 25 - Christmas Day
- December 26 - Boxing Day
Employers are not obliged to give bank holidays off, but they must mention this in their written contract.
Public holidays for the year 2025 are the following:
- January 1 - New Year's Day
- April 19 - Good Friday
- April 22 - Easter Monday
- May 5 - Early May Bank Holiday / Labour Day
- May 26 - Spring Bank Holiday
- August 25 - Summer Bank Holiday
- December 25 - Christmas Day
- December 26 - Boxing Day
Employers are not obliged to give bank holidays off, but they must mention this in their written contract.
Taxes for Employers in Uk
Employer's taxation is based on the His Majesty's Revenue and Customs (HMRC) - Pay As You Earn (PAYE) system.
- Employer Taxation: 12% on a weekly salary
- Contribution to the social security system: 13.8% on a weekly salary
- Corporate Income tax: 19%
The employer's cost in the UK is determined at 18.55% of the employee's salary.
It includes the following:
- Employer National Insurance (social security): 15.05%
- A workplace pension is 8.00%: 3.00%( employer's contribution), it also includes 5.00% (employee's contribution)
- Apprentice Levy tax: 0.5%
It also includes £20 as PI insurance.
Taxes for Employees in Uk
The income tax on the employees is calculated as an individual tax based on progressive rates. It is impacted by additional factors like household conditions and the number of children an employee has.
| Annual Income in Pound Sterling | Tax Rate |
|---|---|
| up to 12,570 | 0% |
| 12,571–50,270 | 20% |
| 50,271–150,000 | 40% |
| over 150,000 | 45% |
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There is no statutory requirement for a probation period in the UK. The market practice of probation in the UK is from 3 months to 6 months, depending upon the business and the employment agreement.
Termination in Uk
In the United Kingdom, the termination process can be quite complex. No employer can terminate an employee who has completed their probation at will.
The termination has to be based on one of the following four causes:
- Fair dismissalWhen the employee has not followed the company's rules or has failed to perform their duties.
- Unfair dismissalWhen the employer does not have good reason to dismiss an employee or/and when the company has failed to follow the disciplinary procedure.
- Constructive dismissalWhen the employee has to leave their job, against their will, due to their unreasonable conduct.
- Wrongful dismissalWhen the company has not followed the dismissal procedure and/or has given the wrong reasons for the dismissal.
Notice Period
In the United Kingdom, the notice period for the termination is determined by the number of years of service of the employee.
| Length of employment | Notice period |
|---|---|
| 1-2 years | 1 week |
| 2-12 years | 1 week per year of service |
| 12+ years | 12+ weeks |
Severance Pay in Uk
In the United Kingdom, employees are eligible for severance pay if they are terminated due to redundancy. It is determined by the employee's age and the number of weeks they have worked for the organization.
| Age | Number of week's pay for each year of service |
|---|---|
| 22 | 0.5 week's pay |
| 22-40 | 1 week's pay |
| 41 and above | 1.5 week's pay |
Employees or Contractors in Uk
The employer determines whether they need a full-time employee or a consultant/ contractor. It is dependent on the short-term and long-term goals of the business.
- A full-time employee is eligible for various benefits, such as:
- Statutory sick pay
- Statutory maternity and paternity leaves
- Statutory redundancy pay
- Minimum notice period
- Flexible work hours
- Legal protection from unfair dismissal
- Time off in lieu of work
- Health insurance
All these benefits are available only when an employee is 'continuously' employed with the organization. - A consultant or a contractor is a person who is either self-employed, such as a lawyer, characterized accountant, or a doctor with a private clinic.
- Consultants work from project to project. They either work for their entity or multiple clients. They are not part of a payroll system. Their benefits may be different from those of full-time employees.
If an employer has been found to employ a worker who did not have permission to work in the U.K. or is employed in a job, for which she was not permitted. Then the employee can be sent to jail for 5 years and have to pay an unlimited fine.
Final Words
The United Kingdom attracts good global talent owing to its employee and business-friendly work policies. Engage with tech-enabled Employer of Record services to streamline HR and payroll processes. An EOR service provider will ensure legal compliance for employment.
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Social Security in Uk