- Overview: United Kingdom (UK)
- Global HR Compliance
- Global PEO and payroll
- Work permit for hiring expats via PEO
- Expand without a company set up
- Contractor vs. employee: which is better?
HR Compliance in the United Kingdom
Hiring a workforce for your business in international markets can be a complex and challenging undertaking. Every country has its own labor laws and regulations, and employers must be careful to comply. HR challenges are particularly prevalent in the UK market, post-Brexit.
When hiring talent in the UK for your company or your clients, it is crucial to comply with legal and tax requirements. As your global HR partner, Acumen International takes the guesswork out of global compliance with our innovative global employment solution. We help you navigate the complexities and nuances of UK labor legislation, and manage employee on-boarding, payroll and compensation, including mandatory and voluntary benefits, on your behalf.
We diminish your legal and financial risks by ensuring you stay fully compliant in the UK, so you can focus on growing your business. Request a Quote >>
The labor laws and regulations of your home country may not apply to overseas employees, and things can become even more difficult if you need to hire talent in multiple locations. You need to fully understand in-country employment requirements for hiring, compensating and terminating global talent compliantly, to avoid exposing your business to legal and financial risks.
A lack of in-country expertise in HR compliance and employment requirements in the UK can be a major hurdle to hiring and payrolling your overseas staff. Acumen’s global employment and HR compliance solution offers a simple and convenient way to meet your global hiring needs in the UK and worldwide. Our solution is designed especially for companies like yours, to help you meet your global hiring needs and remain compliant while you grow your business in the UK.
We take the inconvenience of HR management off your shoulders and handle hiring, payroll, benefits and firing on your behalf. Acumen’s UK Employer of Record (EOR) solution makes it possible for you to quickly hire both local and expatriate workers in the UK, eliminating the need to set up a legal business entity prior to getting your business operations underway.
Risks of Hiring Contractors in the UK
To circumvent the complexities of employment, taxation and payroll laws that have emerged post-Brexit, some businesses have opted to hire contractors, consultants, or independent sales agents. While those options may appear to provide a good short-term solution that saves you time and money, they can put your company at risk of high penalties for misclassification violations that hurt your bottom line in the long run.
In particular, the IR35 Off-Payroll Working Rules rolled out by the UK government on April 6, 2021 make considerable changes to the regulations for engaging independent contractors. The Rules apply to contractors who provide services to a client through their own limited company or via other intermediary services, including partnerships, personal service companies or individuals.
The Rules ensure that contractors who provide services to a client pay the same income taxes and contributions as regular employees. In such cases, the onus of determining whether the Rules apply to their contractors rests squarely on the shoulders of the employer.
Workers to whom the Rules apply include:
- Workers who provide services through an intermediary
- Clients who receive contractor services through an intermediary
- Agencies who provide contractor services through an intermediary
If the Rules apply, it is up to the employer to deduct income taxes and National Insurance contributions from the contractor’s fees, and pay them to Her Majesty’s Revenues and Customs (HMRC). Employers must also make their own National Insurance contributions and Apprenticeship Levy payments, if applicable.
Hiring in the Gig Economy
In addition to complexities concerning taxes and contributions, the practice of hiring “gig” workers recently hit a wall when Britain’s Supreme Court ruled that Uber Technologies must treat its drivers as regular workers, providing them with rest breaks, vacation pay and minimum wages while using the Uber app.
Fallout from the Uber ruling is expected to spill over to other entities that use gig workers, like Amazon delivery services, various takeout delivery services, and other services with similar business models. For businesses expanding globally, hiring gig workers could entangle them in legal troubles as workers file claims for better job security, benefits and improved working conditions.
New Rules for 2021
Because the dust has not yet settled post-Brexit, you can expect additional laws and regulations to emerge as new obstacles arise. To keep you posted and help avoid the complexities of UK taxation and contributions for different categories of employees, partnering with a Global Employer of Record service provider makes good business sense.
Acumen’s dedicated team of global experts works around the clock to monitor changes in the HR laws and compliance requirements. We continually update our system to provide our clients with the latest legislative changes that may impact their business operations.
Acumen’s GEOR solution is designed to help companies like yours expand into global markets without excessive headaches or inconvenience. We navigate the employment laws in the UK and 190 countries world-wide on your behalf, so you can focus on your international business operations.
Hiring Your Workforce in the UK
UK employment law draws distinctions between employees, workers and self-employed. Employers have the most control over employees, and employees in turn enjoy the most legal protections and rights. The mutual obligations of both employer and employee are well defined, with little room for ambiguity.
Workers are defined as individuals who provide services without having their own business entity. They have no protections against unfair dismissal, and no rights to severance pay. The self employed are contractors who run their own businesses and have even more limited protections against unfair treatment.
UK Laws Governing Discrimination
UK employment law prohibits discrimination against employees and workers based on disability, age, gender, sexual orientation, pregnancy, race, religion or marital status. Employers can be held liable if one of their employees discriminates against another. Discrimination laws apply for both hiring and termination of workers and employees.
During the COVID-19 crisis, many employers attempted to skirt termination laws by placing their employees on furlough, meaning the employee is not technically fired, but neither are they fully compensated. This practice puts workers in a difficult situation, since they are technically still employed, which can make them ineligible for unemployment benefits and other types of assistance.
Partnering with a global EOR is a safe and effective way to compliantly hire employees without having to decipher the complexities of UK employment laws on your own. We make sure that the employees we hire on your behalf are given access to all the rights and protections afforded them by UK law, eliminating the risks of lawsuits, fines and penalties for your company.
Recruiting Talent in the UK
To find the very best talent to staff your UK business operations, be sure to leverage every available type of local media, including print, airwaves and online resources, to advertise open positions.
Acumen International can help you arrange onboarding and payroll for your chosen candidates in the UK, to ensure they are fully compliant. Our global employment solution lets you legally onboard your global workforce in full compliance with UK labor laws. We provide payroll and benefit disbursement services to help you reinforce your talent pipeline, elevate your brand and grow your business with minimal risk of fines and penalties.
NOTE! Talent recruitment is not a key service of Acumen International. We are happy to provide recruitment as an on-demand service upon request, with subsequent EOR services for your selected candidates.
UK employment contracts do not have to be in writing, but employers must provide employees and workers with a written Statement of Employment Particulars, detailing the primary conditions of employment, such as job title and duties, place and hours of employment, compensation and benefits, grievance policies, training and probationary periods, and conditions for termination.
The principle written statement should outline the legal working relationship between employee and employer. The written statement must be in English and provided to the employee on the first day of employment, with a more detailed written statement provided within two months of commencement of employment.
The subsequent written statement must include information about pensions, collective agreements where applicable, and disciplinary and grievance procedures.
Fixed-Term vs Indefinite Contracts
Fixed-term employment engages the services of a worker for a defined time period, set in advance, after which the employee is legally terminated. A fixed term agreement is not based on services rendered, but on the timeframe outlined in the agreement. Nevertheless, fixed-term employees are entitled to the same conditions and treatment as full-time staff during their term of employment.
The UK labor law does not provide the notion of ‘indefinite contract’. The UK law envisages full-time and part-time agreements (which are indefinite employment contracts by their nature, i.e., they define the beginning date of employment but do not state the termination date, and can be terminated by submitting a notice in line with the applicable notice periods). Both contracts are envisaged for permanent positions.
When an employee provides services to a company prior to receiving a formal agreement, employers are sometimes tempted to backdate an employment contract. However, this is strongly advised against.
Backdating can be considered a criminal offense, with harsh consequences. You may be accused of false accounting, false statements by company directors, forgery or conspiracy to commit fraud. From a lawyer’s perspective, it violates the rules of professional conduct for English solicitors.
Acumen’s UK EOR solution ensures that your employees are legally onboarded within a matter of business days, eliminating the need for backdating. Ask us for advice >>
If your business is located in the UK and changes hands or merges with another company, your employees may be entitled to certain protections under the Transfer of Undertakings (Protection of Employment) regulations (TUPE). TUPE protects employees from losing their jobs to contractors or other service providers when the change of ownership occurs.
Documents needed for compliant employee onboarding in the UK
Businesses wishing to employ UK citizens, EEA and Swiss nationals or UK permanent residents must be careful to obtain the proper documentation prior to onboarding.
Employing workers who are subject to immigration control and have not been granted the right to enter or remain in the UK, or who do not have permission to work in the UK, is a criminal offense. It is imperative that employers understand what types of documentation are required for UK citizens, EEA and Swiss nationals, and immigrants. In addition, you should be prepared for upcoming changes governing EEA and Swiss workers after June 30, 2021.
Documents proving the right to work in the UK include:
- A UK passport proving that the holder is a British citizen
- A passport or national identity card proving EEA or Swiss citizenship (through June 30, 2021)*
- A Registration Certificate or Document Certifying Permanent Residence
- A Permanent Residence Card issued by the Home Office to family members of EEA or Swiss nationals
- A current Biometric Residence Permit for unlimited residence in the UK
- A current passport exempting the holder from immigration control in the UK
- A current Immigration Status Document indicating that the holder is allowed to stay indefinitely in the UK, along with proof of the holder’s National Insurance number
- A full birth or adoption certificate issued in the UK, along with proof of a National Insurance number
- A birth or adoption certificate issued in the Channel Islands, the Isle of Man or Ireland, along with proof of a National Insurance number
- A certificate of registration or naturalization as a British citizen, along with proof of a National Insurance number
*EEA and Swiss nationals will be permitted to continue working legally in the UK until June 30, 2021, without additional documentation. After that time, they will be subject to the same regulations that apply to immigrant workers from other countries.
In addition, there is a plethora of documents required for individuals with temporary permission to work in the UK.
Partnering with Acumen International is a convenient and safe alternative to directly employing your UK workforce. With Acumen, you can rest assured that the employees we hire on your behalf will remain legally compliant and eligible to work, regardless of changing laws and regulations.
Employment Termination and Severance Pay in the UK
The UK government categorizes employee dismissal as fair, unfair, constructive or wrongful.
- Fair dismissal: The employer has a valid reason for dismissal, including inappropriate employee conduct, poor performance, redundancy or legal issues, and adheres to the terms outlined in the employment agreement.
- Unfair dismissal: The employer fabricates the reason for dismissal, dismisses the employee unfairly, or acts unreasonably in the dismissal process.
- Constructive dismissal: The employee resigns due to breach of contract on the part of the employer.
- Wrongful dismissal: The employer breaks the terms of the employee’s contract during the dismissal process, such as failing to give agreed-upon notice or provide severance pay as defined in the employment agreement. Wrongful dismissal is distinct from unfair dismissal in that it involves breach of contract.
It is important to bear in mind that employee grievances for unfair, constructive or wrongful dismissal often only surface after the employee has been terminated. Up until that point, the employer may have no indication that there will be an issue.
If charges are brought against you for wrongful termination, you will have to prove that:
- there was a valid reason for dismissal
- your actions were fair and reasonable
- your behavior was consistent with treatment of other employees
- you thoroughly investigated the circumstances prior to dismissal
Inappropriate termination of an employment agreement can result in prosecution and serious fines and penalties.
Partnering with Acumen International can help you avoid legal troubles associated with employee termination in the UK, saving you time and money, and sparing your company from irreparable damage to its reputation as a global employer.
An employee must be given a statutory minimum notice period or at least the one stated in their agreement, whichever is longer. The one who’s been continuously employed for more than one month but less than two years is entitled to one week’s notice. In such a case they may also be entitled to receive an additional week’s notice for each complete year of work, up to a maximum of 12 weeks. On the contrary, the statutory minimum notice that an employee should give to his/her employer doesn’t increase with time. It stays fixed at one week throughout the employment.
If dismissed because of redundancy, an employee continuously employed by an employer for two years is entitled to a statutory redundancy payment (SRP). The amount is calculated with a statutory formula based on the employee’s age, salary and length of service.
There are no further statutory rights to severance payments. This said, an individual’s employment agreement may provide for severance payment. On termination, the employee is entitled to any amounts he/she has accrued under the contract that have not yet been paid.
A compensation payment may also be made in case of a valid claim for unfair dismissal by an employee with the required length of service.
Employee Benefits and Contributions
When negotiating the terms of an employment agreement in the UK, there are a number of mandatory and optional benefits to consider, as outlined below.
Employers are required to provide 2 types of mandatory benefits in the UK:
- National Insurance Contributions (NICs)
- Employee pension plans
As a global EOR/PEO service provider, Acumen can render support for your company’s benefits strategy along with compliant international onboarding, to help you attract top talent while remaining compliant with UK laws and regulations. As a trusted industry expert in the UK, Acumen International has the expertise to match the best benefits and compensation packages with your international employees in the UK and in 190 countries around the globe.
UK Statutory Regulations and Employee Benefits
Minimum statutory salary
The National Minimum hourly wage applies to all eligible workers, including those not paid by the hour. Regardless of the terms of payment, total wages must be at least the equivalent of minimum wage. Minimum wages are revised every April.
Current rates for the National Living Wage and the National Minimum Wage:
|Year||25 and over||21 to 24||18 to 20||Under 18||Apprentice|
|April 2020 (current rate)||£8.72||£8.20||£6.45||£4.55||£4.15|
|April 2019 to March 2020||£8.21||£7.70||£6.15||£4.35||£3.90|
Reasons for minimum salary increases
Employers must pay workers the correct minimum wage. With changes in NLW/NMW, the minimum salary will change as well.
If the employer opts to set up a probationary period, it must be clearly outlined in the Statement of Employment, Particulars provided on the first day of employment. There are no regulations governing the length of probation, but a probationary period typically lasts no longer than 6 months for a new employee, and 3 months for an employee changing positions internally.
Employees are only required to work overtime if the requirement is included in the employment agreement. By law, employees cannot be forced to work more than an average of 48 hours per week. Employees can agree to work longer, but the agreement must be in writing and signed by the employee. Unless an employee’s contract guarantees overtime, the employer is allowed to prohibit it.
Employers do not have to pay workers for overtime. However, the worker’s average pay must not fall below the National Minimum Wage.
Workers are not generally permitted to work more than 48 hours per week. It is possible for workers to opt out of the 48-hour week.
Seniority recognition for tenure of employment is important when considering redundancies. Seniority/tenure is also important when certain age thresholds are exceeded.
Most workers who work a 5-day week must receive at least 28 days of paid annual leave per year, or the equivalent of 5.6 weeks of paid holidays. An employer can include bank holidays as a part of statutory annual leave.
Employees are allowed time off for illness, but they must provide the employer with proof of illness from a doctor if they are absent for more than 7 days in a row, including non-working days, such as weekends and bank holidays.
If employees cannot work because of the COVID-19 quarantine, an ‘isolation note’ can be obtained online from NHS 111 without seeing a doctor.
Eligible employees can take up to 52 weeks of maternity leave. The earliest that leave can be taken is 11 weeks prior to the expected due date, unless the baby is born early. Employees are required to take at least 2 weeks of leave after the birth (4 weeks for factory workers).
Statutory Maternity Pay (SMP)
Employees on maternity leave who meet requirements are also entitled to 39 weeks of statutory maternity pay (SMP). The employee must give the employer 28 days notice prior to the date SMP begins.
Fathers may be eligible for 1-2 weeks of paternity leave.
Retirement and pensions
Workers who pay contributions to the UK National Insurance program qualify for the basic State Pension. Rates are currently £137.60 per week. The basic State Pension increases every year based on the average percentage of growth in wages in Great Britain. Workers may receive additional retirement income as outlined in their employment agreement.
Voluntary Employee Benefits
In addition to providing mandatory benefits, employers are often compelled to offer additional benefits to sweeten the pot to attract top talent, especially in a competitive environment. Voluntary benefits may include:
- Flexible hours or remote options
- Additional health benefits
- Travel expenses
- Other perks and benefits
Employers may be required to report expenses and benefits provided to employees, and to pay taxes and National Insurance on them.
Along with our core global employment and compliance solution, Acumen International provides a broad range of voluntary benefits, ensuring that our clients’ companies remain competitive in talent acquisition and retention. We are more than a global PEO – we serve as your international partner in HR management in the UK.
Acumen International: Your HR Compliance Partner in the UK
Going global can be fraught with complex in-country laws and regulations that many employers are unprepared for. You can avoid non-compliance pitfalls in the UK by partnering with Acumen International, your global employment and HR compliance partner.
Acumen is available 24/7 to help you navigate the numerous complexities of the global workforce on-boarding, payroll and termination that can arise as you build your global presence. With Acumen International as your trusted global partner with hyper local expertise, you can reduce compliance risks and streamline your HR processes in the UK.
In addition to our core solution for compliantly employing your overseas workers on your behalf, Acumen’s team of English-speaking professionals can deliver a custom solution that includes payroll, benefits and perks for your offshore teams. Acumen provides you with an all-in-one HR solution in the UK that saves you time, money and valuable resources, so you can focus on growing your business.
Consequent to Brexit and the coronavirus pandemic, UK employment laws and regulations are in the process of reform, making it difficult for international companies to remain compliant. You can simplify and streamline your global hiring needs by outsourcing them to Acumen International.
Reduce compliance risks, stay current with emerging laws and regulations, and compensate your global employees in the UK and 190 countries worldwide with Acumen International’s world class global employment and compliance solution.