Employment Law in the United Kingdom: A Complete Guide for Global Companies

The U.K. is a favorable location for global companies eyeing expansion. The U.K. provides access to a large and affluent consumer market, and it’s known for its ease of doing business. Plus, its various international trade agreements allow companies to easily access other foreign markets.

Additionally, the U.K. has a well-developed legal system, transparent regulations, tax incentives, and a strong financial infrastructure. In fact, London ranks as the top global fintech hub and one of the world’s leading tech startup hubs.

Below, we highlight essential U.K. employment laws to consider before entering the country and hiring remote talent there. Plus, learn how to simplify and ensure hiring compliance with the right global partner.

Employment contracts in the U.K.

In the U.K., employers have no legal obligation to provide employees with a written employment contract.

However, by law (Employment Rights Act 1996), anyone legally classified as a worker or an employee has the right to a written statement of employment details within two months of the employee's start date.

The written statement must include specific terms and conditions of employment, such as names of the employer and employee, job title, pay rates and intervals, working hours, and information about sick pay and paid leave.

Various types of employment contracts are allowed in the U.K., and employers have flexibility in structuring employment relationships. The choice of agreement depends on factors like the nature of work, duration of employment, and the needs of the employer and the employee.

Common employment contracts in the U.K. are indefinite contracts, temporary contracts, fixed-term contracts, and zero-hour contracts.

Learn more: Types of Employment Contracts Guide 

Employment rights in the U.K.

The U.K. has a comprehensive employment law framework covering various employee entitlements like working hours, minimum wage, statutory benefits, retirement, and leave. We discuss these in detail below.

Working hours

The Working Time Directive protects employees in the U.K. This mandate states that an individual should not exceed 48 working hours in seven days, including overtime.

Employees may choose to voluntarily opt out of the 48-hour work week by documenting this agreement in writing.

National minimum wage

The minimum wage, or National Living Wage, in the U.K. varies based on employee age. Starting April 2024, the minimum wage rates will change to the following:

• The National Living Wage for those aged 21 or older: £11.44 hourly
• The National Minimum Wage for those aged 18 to 20: £8.60 hourly
• The National Minimum Wage for those aged under 18: £6.40 hourly

Statutory benefits

Companies hiring in the U.K. must adhere to local employment and labor laws, ensuring compliance with statutory employee benefits. Additionally, they must be familiar with the supplemental benefits employees typically expect from their employers.

Mandatory employee benefits in the U.K. include:

• National health insurance
• Sick pay
• Social security
• Pension

Supplemental employee benefits in the U.K. include:

• Private medical insurance
• Dental and vision insurance
• Life insurance
• Additional retirement benefits

Learn more: Guide to Mandatory and Common Employee Benefits in the U.K.

Probationary period

Probation periods are allowed in the U.K. and typically last between one and six months. Probation periods are optional and not mandatory.

Termination

An employee or employer may choose to terminate an employment contract by providing statutory notice.

Employees who have completed at least one month’s service are entitled to statutory minimum notice periods. The statutory minimum notice periods that an employer must communicate to an employee are:

• At least one week's notice during the probationary period and for service of less than two years
• At least one week's notice for each year of continuous service if the length of service is more than two years but less than 12 years
• At least 12 weeks' notice if the length of service is 12 or more years

In the U.K., the standard practice involves providing one week's notice during the probation period, if applicable. Following this initial period, the notice period extends to one month. After completing this one-month probationary period, the notice period then becomes three months.

Employers must pay out any unused leave at the time of termination.

Severance

Employees in the U.K. aren’t entitled to severance pay on top of the contractual payments stipulated in the employment contract. However, employers that offer severance pay as part of their benefits packages gain a competitive advantage over other hiring companies.

The only exception is when employees with over two years of service with the same employer are dismissed for redundancy. In this case, the following redundancy pay would apply:

• Half a week’s pay for each full year the employee was under 22 years old
• One week’s pay for each full year the employee was over 22 but under 41 years old
• One and a half week's pay for each full year the employee was over 41 years old

The cap for length of service applicable to redundancy pay is 20 years.

Retirement

Employees typically receive a government state pension for basic needs, though it’s relatively small. Employers must enroll all eligible workers in a workplace pension scheme, including employees who:

• Are between the age of 22 and the state pension age
• Earn at least £10,000 per year
• Work in the U.K.

Both employers and employees make contributions to the pension. Employers contribute at least 3%, and employees contribute 5%. Qualifying earnings for contributions include:

• Salary 
• Bonuses 
• Commissions 
• Overtime 
• Statutory sick pay
• Statutory maternity, paternity, or adoption pay

Employees can opt out of the pension scheme within a month of receiving pension details from the provider. Opting out during this period results in a refund of contributed funds. Beyond this timeframe, employees simply discontinue active membership in the scheme.

There is no mandatory retirement age in the U.K. The age at which people become eligible for the state pension is 65 (set to increase gradually to 67 by 2028).

Employers often choose to contribute more than 3% to their employee’s pension funds to attract and retain top talent by matching an employee’s contribution of up to 5%.

Leave entitlements

Employment laws regulate the leave entitlements for employees in the U.K., including annual and parental leave. Other types of leave that U.K. employers commonly provide their employees are sick leave and bereavement. 

Statutory annual leave

Employees in the U.K. are entitled to 20 days of paid annual leave. 

Maternity leave

Total statutory maternity leave in the U.K. is 52 weeks and has two parts:

Ordinary maternity leave, which is 26 weeks
Additional maternity leave, which is 26 weeks

The earliest a mother can take maternity leave is 11 weeks before the expected week of childbirth unless the baby is born early.

Fathers may choose to take one or two weeks of paternity leave at 90% of their average earnings.

Read also: Guide to Paid Maternity Leave Around the World

Sick leave

There is no statutory requirement to allow employees to take time off when sick, but if an employer refuses to provide, it would most likely breach any implied terms of trust and confidence.

However, most U.K. employees are entitled to 28 weeks of sick pay at £109.40 per week. The employer covers this payment.

Other types of leave

Employees in the U.K. may also be allowed time off to:

• Attend prenatal appointments
• Attend adoption appointments
• Accompany other employees in disciplinary or grievance hearings
• Join activities related to trade unions
• Seek other employment opportunities if facing redundancy
• Carry out the duties or receive training as a pension scheme trustee
• Act as an employee representative
• Receive training or carry out the duties of the safety representatives
• Perform the duties of the members of the European Works Council
• Care for family or dependents in the event of an emergency, public duties, or parental leave
• To go on bereavement leave
• To cope with the loss of a child or stillbirth

Data privacy

Employers doing business in the U.K. must comply with the Global Data Protection Regulation (GDPR) and the Data Protection Act 2018 for fair and lawful processing of employee data, ensuring clear purposes and robust security.

Employees should receive detailed information about data usage. Transferring data outside the U.K. requires adequate protection, and the Information Commissioner can impose fines of up to £17.5 million or 4% of worldwide annual turnover for severe U.K. GDPR breaches.

Discrimination protections in the U.K.

U.K. employment law safeguards employees and workers from workplace discrimination, including direct or indirect discrimination and any type of harassment based on protected characteristics, such as age, disability, gender reassignment, pregnancy, race, sex, sexual orientation, marriage or civil partnership status, religion, or belief.

Employees are also protected against certain types of discrimination if someone they are associated with has a protected characteristic.

The employment relationship prohibits discrimination at every stage, including recruitment and after termination.

Public holidays in the U.K.

There are typically eight public holidays in the U.K. Still, employers don’t need to designate these as non-working days or provide paid time off (unless these bank holidays make up the overall annual leave entitlement).

England & Wales public holidays

Scotland public holidays

Northern Ireland public holidays

Trade unions in the U.K.

U.K. workers have the right to:

• Choose to join or not join a union
• Leave or remain a member of a union
• Belong to a union, even if it's not the one the employer negotiates with on terms, conditions, and pay
• Belong to more than one union

Employers in the U.K. are not allowed to:

• Offer an employee an incentive to leave a trade union
• Threaten to mistreat an employee if they do not leave a union
• Insist that an employee join or reject a trade union
• Insist that an employee leave one union for another
• Dismiss an employee for being or wanting to become a union member
• Dismiss an employee for taking part or wanting to take part in union activities
• Dismiss an employee for not joining or not wanting to join a union
• Treat an employee unfavorably for joining a union
• Treat an employee unfavorably for taking part in union meetings
• Treat an employee unfavorably for leaving a union

Compliantly hire employees in the U.K. with Velocity Global

While the U.K. presents many benefits for expansion, navigating its employment laws without support exposes you to hefty noncompliance penalties. Protect your business and eliminate the risk by partnering with Velocity Global.

As an employer of record (EOR), Velocity Global simplifies expansion and hiring efforts across more than 185 countries, including the U.K. By partnering with us, you eliminate the need for entity establishment and mitigate noncompliance with international employment laws.

Our EOR solution supports every aspect of U.K. expansion, from hiring, onboarding, immigration, and compliance to running global payroll, administering locally tailored benefits, and providing ongoing HR support for your U.K. workforce.

Read our guide to hiring employees in the U.K. to learn your options for compliantly hiring top U.K. talent from anywhere in the world.

Or contact us today to kickstart your expansion and easily engage top U.K. talent.
 

Legal Disclaimer: The information available in this guide does not, and is not intended to, constitute legal advice and is for general informational purposes only. You should contact your attorney to obtain legal advice with respect to any particular legal matter. Only your individual attorney can provide assurances that the information contained in this guide—and your interpretation of it—is applicable or appropriate to your particular situation. All liability with respect to actions taken or not taken based on the information in this guide is hereby expressly disclaimed. The content in this guide is provided "as is," and no representations are made that the content is error-free.