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Understanding United Kingdom (U.K.) labor laws is complex. From probationary periods to wage restrictions, pension contributions to termination procedures, U.K. employment law requires employers to navigate a complex path. The U.K.’s exit from the European Union, known as Brexit, only made matters more complicated.
In this guide, we’ll dive into the key statutes that dictate how U.K. labor laws govern all employees in England, Wales, Scotland, and Northern Ireland — and how employers can set themselves up for success before recruitment even begins.
To start, let’s look at the five Acts of Parliament that legislate labor laws in the U.K.
U.K. labor laws find their contemporary roots in the 1974 Health and Safety at Work Act. In the years since its original passage, however, several acts of legislation meant to strengthen governmental oversight of U.K. workplaces have expanded labor protections.
The Acts of Parliament that are most important for today’s employers to keep in mind when hiring remote and on-site employees in the U.K. include:
So what’s the first step toward living up to the standards of U.K. employment law? A properly outlined employment contract.
U.K. employment contracts may be written or verbal. Although it’s helpful to put all terms into a written agreement (see below), some implicit terms may go unsaid — and contracts of employment may even include so-called “incorporated terms” referenced from secondary sources.
That said, U.K. labor law mandates employers provide employees with written statements that outline:
Additionally, the terms of each written statement of employment must include (but are not limited to):
Labor laws in the U.K. are complex and include nuances that can’t be captured in a high-level overview such as this guide. The particulars of terms for employees will further depend on whether they’re employed under one of several worker classifications.
The classifications of individual workers in the U.K. are far more layered than employers may initially assume. Depending on an employer’s responsibilities and the employee’s rights, U.K. employment law will classify talent as a…
Employers hiring talent in the U.K. will want to pay particular attention to the first categories, the ins and outs of which can be a bit tricky:
Notably, U.K. employment law dictates that intellectual property (IP) rights default to creators rather than those who employ them. With this in mind, employment contracts should stipulate that any work/IP created during the contract belongs to the employer, not the contractor.
Another way employment law in the U.K. diverges from United States regulations is the definition of wages. Rather than setting local or national minimum wage rates, U.K. labor law breaks worker compensation into three categories:
In addition to hourly rates of pay, labor laws in the U.K. outline guidance about working hours, rest breaks, and annual leave entitlements.
As previously mentioned, the WTR restricts the number of hours employers can require their employees to work. Employees willing to work more than an average of 48 hours per week, however, can agree to work overtime. The only stipulation is that employers and employees agree on a contract that outlines overtime hours and pay.
U.K. labor laws notably don’t define a specific rate of pay for overtime. Nor does labor law in the U.K. lay out a formula for determining a ratio based on an employee’s regular wages.
Therefore, employers who contract employees to work more than 48 hours per week are not mandated to pay those employees any rate above their standard pay. Similarly, though labor laws in the U.K. do not define specific “Night Shift Pay,” they limit night shifts to an average of eight hours per 24-hour period.
Though contracts may expand these terms, employment law in the U.K. outlines three specific types of standard rest for employees: rest breaks at work, daily rest, and weekly rest.
The right to rest breaks at work includes one uninterrupted 20-minute paid or unpaid rest break during each working day of more than six hours.
After work, U.K. labor laws guarantee the right to 11 hours of rest before starting the next shift.
In addition to rest at work and daily rest, weekly rest ensures employees have either:
Labor law in the U.K. entitles all employees to a minimum of 28 days of paid leave each year. Bank holidays and public holidays can be included within this allowance, though employers may instead offer paid leave in addition to what’s mandated by U.K. employment law.
Furthermore, in addition to paid leave, employees who fall ill may be eligible for sick pay during periods of illness, depending on their contract and employment classification.
U.K. labor laws likewise govern family and parental leave, including statutory maternity pay, according to the individual classification of each worker, employee, and independent contractor. Individual employment contracts must outline policies for:
Employees in the U.K. have rights to return to work, including the right to be offered a suitable alternative job for up to 18 months, after leave. Additionally, there are various unpaid leave options, including unpaid carer’s leave and unpaid parental leave.
Next, let’s look at the payroll withholding rules detailed in U.K. employment law.
Rather than employer-sponsored or self-funded health insurance, employees in the U.K. [pay into the National Insurance (NI) program](https://www.investopedia.com/terms/n/national-insurance-contributions-nic.asp#:~:text=National Insurance is an umbrella,re eventually entitled to receive.) through payroll deductions. NI payments go toward funding universal health care, the public pension program, and unemployment benefits.
The government pays other entitlements, like statutory sick pay and parental benefits, through social security.
Though talent categorized as workers won’t necessarily receive benefits, [here's a breakdown](https://www.nerdwallet.com/uk/personal-finance/national-insurance-contributions-changes/#:~:text=The Chancellor%2C Jeremy Hunt%2C announced,%25 to 10%25 in January.) of how NI contributions work for employees and self-employed talent:
U.K. labor laws do not require employers to directly contribute to NI for their employees through Class 1 deductions. Rather, employers contribute through Class 1A on certain expenses and benefits they provide to their employees.
This can include compensation like bonuses, company cars, and private medical insurance. The current rate for Class 1A contributions is 13.8% (as of April 2024) on the value of the benefit provided.
With exceptions for gross misconduct (e.g., theft or violence), employees in the U.K. cannot be terminated without sufficient written notice. In fact, though U.K. labor laws state that policies and procedures for dismissal are expected to be outlined in initial offers of employment, no U.K. employee works “at will.”
But what seems like a flexible, employer-friendly labor environment can ultimately be problematic for employers. U.K. employment law offers that employers only provide “fair” notice and reason for termination. That leaves room for employers to make errors and incur costly financial penalties.
Furthermore, in the absence of gross misconduct, employers must offer employees appropriate notice of their pending dismissal based on length of service. Labor laws in the U.K. define the minimum notice period as:
If the employee has been working under a contract of employment for at least two years of continuous service, they are also eligible for redundancy pay.
So, what’s the easiest way to avoid violating the sometimes vague guidance of U.K. employment law?
Consider, for example, a seasonal employee contracted to work in a call center during winter holidays. Fixed-term contracts stipulating a specific end date at the initial time of employment is one way to support an employer’s fair dismissal of this employee at the end of the holiday season.
For an employee to be fairly terminated for statutory redundancy — say, a Transfer of Undertakings (TUPE) in which one call center is acquired by another and the organization does not need all acquired workers — they must have previously received notice of the potential for their termination that includes:
When an employee is terminated for gross misconduct, employers must take several steps, including holding three specific meetings, to ensure the termination is fair.
First: the conduct should reflect prohibited actions outlined in the initial employment agreement. Then, employers should initiate a three-meeting sequence:
Meeting #1: An announced meeting to discuss a performance issue, during which the employee is allowed to explain their conduct and the employer and issues a first written warning with improvement expectations and consequences for continued shortcomings.
Meeting #2: A follow-up meeting to discuss improvement plans for continued unsatisfactory conduct. This meeting may include a final written warning with stricter timelines and clearly state the potential for dismissal if the issues continue.
Meeting #3: This meeting should include warning the employee that dismissal is now a possibility. Following this meeting, the employer can decide if they want to provide another opportunity for the employee to improve their performance, or dismiss them. Once a decision is reached, the employer will need to inform the employee of their decision.
In the case that an employee believes that the consequence for their conduct, including what they may view as an unfair dismissal, is too severe, they may appeal. Employers must recognize and support an employee’s right to appeal. Failing to do so may count against them during any hearing or appearance before an Employment Tribunal.
Compliance with U.K. labor laws is governed by civil statutes enforced when an employee or labor organization sues an employer for specific violations.
The financial penalties for violation can total in the tens of thousands of pounds. Employers may even face jail time.
Employees who choose to sue their employer in the U.K. are likely to consult with the Health and Safety Executive (HSE), a body charged with protecting employee health and safety in the workplace, and advise them when to take action against employers.
The next step in the adjudication process of workplace health and safety disputes is to bring the matter before an Employment Tribunal, a relatively inexpensive forum where employees can bring claims against employers for U.K. labor law violations.
Regular review of materials, such as employment contracts, helps employers ensure they contain up-to-date information about company policies and prevents violations, such as not recognizing revisions to U.K. employment law.
But the surest way to maintain compliance? Work with an Employer of Record (EOR), which can help navigate everything from employee benefits to visas and work permits.
Employment tribunals. Fair notice. Mandatory breaks every fortnight. With all this information, it’s understandable to be overwhelmed – especially since U.K. employment laws are regularly reviewed and revised (the most recent revisions took effect April 6, 2024).
The best way to avoid any potential compliance errors? Partner with an EOR like Remofirst. We help businesses of all sizes compliantly hire and manage remote employees in more than 180 countries, including the U.K.
Book a demo today to learn more.
