Employer of Record in the United Kingdom

Employment agreements in the United Kingdom

When employing an individual in the U.K., an employer must give employees a document known as a written statement of employment particulars, stating the main conditions of employment. The employment of particulars includes a principal statement and a wider written statement.
 

According to the U.K. Government Employee Contracts Guide, the principal statement must include:

• The employer’s name
• The employee’s name
• Job title
• A description of work
• Start date
• How much and how often an employee will be paid
• Work hours and days
• Holiday entitlement and if that includes public holidays
• Where an employee will be working and whether relocation is necessary
• If an employee works in different places, the locations and employer’s address
• How long a job is expected to last, and the end date if it’s a fixed-term contract
• Probationary period length, if applicable, and its conditions
• Any other benefits such as childcare vouchers and lunch
• Whether or not obligatory training is required and if it is paid by the employer

Onboarding in the United Kingdom

On the first day of employment, the employer must provide the employee with information about:

• Sick pay
• Other paid leave such as maternity leave and paternity leave
• Notice periods

The employer can include the information above in the principal statement or provide it in a separate document on the first day of employment.

As stated in the U.K. Government Employee Contracts Guide, employers must give employees a wider written statement within two months of an employee’s start date. This must include information about:

• Pensions
• Collections agreements
• Any rights to non-compulsory training provided by the employer
• Disciplinary and grievance procedures

Probationary periods in the United Kingdom

Probationary periods in the U.K. are common but not required by law, and they typically last between three and six months. Depending on the employer, employees may not receive all contractual benefits during the probationary period. However, employees remain entitled to all statutory rights during this time.

Learn more in our guide to employment law in the U.K.

Average working hours in the United Kingdom

Employees work up to 48 hours per week but can opt out of the 48-hour workweek and work additional hours. Exceptions to these rules apply, including managers and executives who set their own hours

How an employer of record helps you hire in the United Kingdom

An employer of record (EOR) allows you to hire in the U.K. without the headache of setting up a legal entity in the U.K. Because most companies don’t have the resources or extensive knowledge to compliantly hire in international markets, an EOR helps you engage top talent from anywhere and support them based on their local needs. 

As an industry-leading EOR in the U.K.,Velocity Global is a trusted partner in hiring in the U.K. By acting as the legal employer, we hire your new team members through local, compliant employment contracts—and you get back the time and flexibility to focus on your growing business.

Payroll cycles in the United Kingdom

The payroll cycle in the U.K. is usually monthly, with payments made at the end of each month.

Wages in the United Kingdom

In the U.K., the National Minimum Wage and National Living Wage vary depending on age. The minimum wages in the U.K. increase every year on April 1.

As of April 1, 2022, the wages were listed as:

• National Living Wage: £9.50
• Age 21-22: £9.18
• Age 18-20: £6.83
• Age 16-17: £4.81
• Apprentice Rate: £4.81
• Accommodation Offset: £8.70

Bonus payments in the United Kingdom

There are no bonus requirements for employers in the U.K., but they are common. If employers pay either a cash or non-cash bonus, they must report it to Her Majesty’s Revenue & Customs (HMRC), the non-ministerial department of the U.K. government responsible for tax collection. Reporting requirements vary depending on the type of bonus.

How an EOR helps you run payroll in the United Kingdom

An employer of record (EOR) in the U.K. helps you compliantly manage your global team payroll, ensuring consistent and accurate pay and tax withholdings for employees living in the United Kingdom. Think of an EOR as your international HR team that understands the complex labor laws and payroll regulations of different markets. 

Partnering with a trusted EOR partner like Velocity Global for global payroll administration in the U.K. offers numerous benefits, like access to a centralized platform for payroll data and reporting, secure data privacy and protection, and time and cost savings.

Tax due dates in the United Kingdom

The deadline for submitting income tax returns is October 31 for paper filings and January 31 for online filings. The U.K. tax year is April 6 to April 5 of the following year.

Tax thresholds in the United Kingdom

The U.K. residence status affects whether individuals need to pay taxes in the U.K. on their foreign income. The U.K. Government’s Income Tax Guide shares that individuals are considered U.K. tax residents if one of the following conditions are met:

• An individual spent 183 or more days in the U.K. in the tax year
• An individual has their only home in the U.K., it was available to use for at least 91 days in total, and time was spent there for at least 30 days in the tax year
• An individual worked full-time in the U.K. for any period of 365 days, and at least one of these days fell into the specific tax year

Non-residents only pay taxes on their U.K. income, not foreign income. U.K. residents usually pay taxes on all income, whether it’s from the U.K. or abroad. However, there are special rules for U.K. residents whose permanent home is abroad.

In the U.K., income tax thresholds depend upon:

• How much income is above Personal Allowance
• How much income falls within each tax band

The standard Personal Allowance is £12,570. Tax is paid on the amount of taxable income remaining after the Personal Allowance has been deducted. Personal Allowance may be larger if Marriage Allowance or Blind Person’s Allowance is claimed. It’s smaller if income is over £100,000.

According to the U.K. Government’s Income Tax Rates Guide, in England, Wales, and Northern Ireland, the following are the tax rates in each tax band if a Personal Allowance is £12,570:

• 0% for taxable income up to £12,570
• 20% for taxable income £12,571 to £50,270 
• 40% for taxable income £50,271 to £125,140 
• 45% for taxable income over £125,140

Income tax bands differ in Scotland versus England, Wales, and Northern Ireland. 

The tax rates and tax bands for all U.K. countries (England, Wales, Northern Ireland, and Scotland) without a Personal Allowance can be found in the U.K. Government’s Tax Rates and Bands Guide.

The corporate income tax rate in the United Kingdom is 19%. 

Social security contributions are payable on employees’ gross annual earnings. The contributions are shared between the employer and the employee. As of 2022, the U.K.’s current social security rate charged on income for employees is 27.8% in total: 14% paid by the employee and 13.8% paid by the employer.

Health insurance in the United Kingdom

All U.K. residents are eligible for free public healthcare through the National Health Service (NHS), including hospital, physician, and mental healthcare. Health coverage in the U.K. has been universal since the founding of the NHS in 1948. Under the 1946 Act, the Minister of Health was assigned to provide a full-scale, free healthcare service, which replaces insurance and out-of-pocket payments. Non-residents with a European Health Insurance Card receive free health coverage. For others, such as visitors, only treatment in an emergency department and for infectious diseases is covered.

Pension in the United Kingdom

Individuals can claim the basic State Pension in the U.K. if they’re:

• A woman born before April 6, 1953
• A man born before April 6, 1951

Following the U.K. Government’s basic State Pension Guide, individuals must have paid or been credited with National Insurance contributions to receive the basic State Pension of £141.85 per week. Individuals born later need to claim the new State Pension. Individuals can claim the new State Pension if they’re:

• A woman born on or after April 6, 1953
• A man born on or after April 6, 1951

The pension age is currently under review, but it’s been set at 67 or 68 years old depending on birthdate. Individuals need at least 10 qualifying years recorded of paying National Insurance to receive any State Pension. Pursuant to the U.K. Government’s new State Pension Guide, the full new State Pension is £185.15 per week.

How an EOR helps you calculate taxes in the United Kingdom

Payroll taxes are taxes imposed on employers and employees. They vary between countries, making compliance a hurdle for businesses that may not have the expertise or resources to navigate payroll taxes in the U.K.

As an employer of record (EOR) with a tenured global footprint, Velocity Global is knowledgeable in handling all aspects of payroll for you, including calculating and filing payroll taxes, withholding and remitting taxes, and issuing tax forms in the U.K.

Annual leave in the United Kingdom

Workers in the U.K. are entitled to several types of leave, including time off granted by employers and national holidays.

Nearly all workers in the U.K. receive 5.6 weeks of paid holiday each year, including agency workers, contract workers, and those with irregular hours. The U.K. Government Holiday Entitlement Guide shares that most workers who work a five-day week must receive at least 28 days’ paid annual leave a year.

Employers use the U.K. government’s holiday entitlement calculator for part-time and irregular hourly workers’ paid time off allotment.

Parental leave in the United Kingdom

Statutory Maternity Leave in the U.K. is set at 52 weeks, where ordinary leave is defined as the first 26 weeks, and additional leave is defined as the last 26 weeks. Mothers are not required to take all 52 weeks but must use two weeks’ leave after childbirth or four weeks for factory workers.

Statutory Maternity Pay (SMP) is paid for up to 39 weeks. Mothers receive 90% of their average weekly earnings before tax for the first six weeks. After the first six weeks, mothers receive £156.66 or 90% of their average weekly earnings, whichever is lower, for the next 33 weeks. SMP is paid monthly or weekly, depending on how the mother is usually paid. All taxes and National Insurance contributions are deducted from SMP.

Paternity leave in the U.K. grants fathers a choice to take one or two weeks of paid leave after childbirth. The statutory weekly rate of Paternity Pay is £156.66 or 90% of the father’s average weekly earnings, whichever is lower. Paternity Pay is paid monthly or weekly, depending on how the father is usually paid. All taxes and National Insurance contributions are deducted from Paternity Pay.

Parents are eligible for Shared Parental Leave (SPL) and Statutory Shared Parental Pay (ShPP) if they’re having a baby, using a surrogate to have a baby, adopting a child, or fostering a child they’re planning to adopt. Parents can share up to 50 weeks of leave and up to 37 weeks of pay between them. They need to share the pay and leave in the first year after childbirth or after the child is placed with the family. To receive SPL and ShPP, parents must take less than the 52 weeks of maternity or adoption leave and use the rest as SPL and take less than the 39 weeks of maternity or adoption pay and use the rest as ShPP. The ShPP has the same rates and conditions as the SMP and Paternity Pay.

Sick leave in the United Kingdom

U.K. employees must present their employer with a physician’s sick note for all illnesses lasting longer than seven consecutive days, including weekends and bank holidays.

To qualify for Statutory Sick Pay (SSP), employees must:

• Be classified as an employee
• Earn an average of at least £123 per week
• Have been ill for at least four days in a row

Employees are eligible to receive £99.35 a week of SSP for up to 28 weeks. Employees will be paid SSP for all the days they normally would have worked, except for the first three days.

Regional and national holidays in the United Kingdom

The U.K has the following eight public holidays, which are not included in the minimum paid leave entitlement. However, employers generally give their employees all of the U.K.’s public holidays off work. The eight national holidays in the U.K. are:

• New Year’s Day (January 1)
• Good Friday (April, the specific day fluctuates each year)
• Easter Monday (April, the specific day fluctuates each year)
• Early May Bank Holiday (May, the specific day fluctuates each year)
• Spring Bank Holiday (May, the specific day fluctuates each year)
• Summer Bank Holiday (June, the specific day fluctuates each year)
• Christmas Day (December 25)
• Boxing Day (December 26)

How an EOR helps you manage leave and PTO in the United Kingdom

An employer of record (EOR) supports companies by managing annual leave, paid time off (PTO), and even local holidays all over the world—including the United Kingdom. When it comes to handling a company's annual leave requirements, an EOR ensures compliance with local labor laws in the U.K. at every step. 

Some EOR partners, like Velocity Global, provide a platform that helps you oversee employee time off in the U.K. By outsourcing leave and time-off management to Velocity Global, you can ensure accurate tracking, compliance, and seamless administration, freeing up valuable time and resources for other business priorities.

Federal benefits in the United Kingdom

Mandatory employee benefits in the U.K. include:

• Holiday entitlement and pay
• Sick pay
• Pension
• Parental leave and pay
• Redundancy pay
• Time off for emergencies

Supplemental benefits in the United Kingdom 

Supplemental benefits are extra benefits an employer offers to boost their employees’' overall benefits package. Common supplemental benefits in the U.K. include:

• Supplemental medical insurance
• Additional retirement benefits
• Employee share schemes
• Health and wellness funds
• Dental and vision insurance
• Flexible working options
• Employee assistance plans
• Employee rewards
• Life insurance

Employers in the U.K. often offer private medical insurance to supplement the NHS, covering additional services like inpatient and outpatient care, wellness programs, as well as dental and vision benefits. While the NHS offers some dental and eye care, these services often require individual contributions. To bridge this gap, employers frequently include enhanced dental and vision insurance in their compensation packages. 

Additionally, U.K. employers may provide life insurance. Employers are also required to contribute at least 3% to employee pension funds, with options to match up to 5%. Beyond the statutory annual leave, many employers attract top talent by offering extra paid leave days and holiday time.

How an EOR helps you administer benefits in the United Kingdom

As the legal employer for your employees living in the United Kingdom, an employer of record (EOR) administers statutory benefits and ensures they are enrolled and contributing to the appropriate government benefits. Additionally, an EOR partner manages the administration of supplemental benefits, including ensuring employees in United Kingdom receive tailored, expert-vetted, and competitive supplemental benefits packages.

Notice periods in the United Kingdom

Employee termination in the U.K. requires employers to give employees between one and 12 weeks’ notice before termination, depending on an employee’s accumulated time of service. The statutory notice periods in the U.K. include:

• One week’s notice for employees with one month to two years of service
• After that, employees are entitled to receive an additional week’s notice for each complete year of service, up to a maximum of 12 weeks

The statutory minimum notice that an employee is required to give an employer does not increase over time, and it remains fixed throughout employment at one week.

An employee continuously employed by an employer for two years is entitled to statutory redundancy pay (SRP) and payment through the notice period or payment instead of notice, depending on the circumstance. Learn more about employment termination payment details in the U.K.

Severance pay in the United Kingdom

While employees in the U.K. aren’t entitled to severance pay, they may offer severance pay as part of their benefits packages to gain a competitive advantage. The only exception is when employees with over two years of service with the same employer are dismissed for redundancy. The redundancy pay is structured as follows: half a week's pay for each full year of service while the employee was under 22 years old, one week's pay for each full year of service when the employee was between 22 and 41 years old, and one and a half week's pay for each full year of service if the employee was over 41 years old. The cap for length of service applicable to redundancy pay is 20 years.

How an EOR helps you process terminations in the United Kingdom

An employer of record (EOR) is responsible for processing terminations in the event you need to terminate an employee in the U.K. This may include adhering to local labor laws and regulations regarding termination procedures, including notice periods, severance pay, and any other statutory requirements. 

As an EOR with experience in terminations, Velocity Global helps businesses minimize the risk of legal disputes or liabilities in the U.K.