United Kingdom

Types of contract

As an employer, the tax and employment responsibilities you have for your staff will depend on the type of contract you give them and their employment status.

Contract types include:

• full-time and part-time contracts
• fixed-term contracts
• agency staff
• freelancers, consultants, contractors
• zero-hours contracts

There are also special rules for employing family members, young people and volunteers.

Full-time and part-time contracts

As an employer you must give employees:

• a written statement of employment or contract
• the statutory minimum level of paid holiday
• a payslip showing all deductions, such as National Insurance contributions (NICs)
• the statutory minimum length of rest breaks
• Statutory Sick Pay (SSP)
• maternity, paternity and adoption pay and leave

You must also:

• make sure employees do not work longer than the maximum allowed
• pay employees at least the minimum wage
• have employer’s liability insurance
• provide a safe and secure working environment
• register with HM Revenue and Customs to deal with payroll, tax and NICs
• consider flexible working requests
• avoid discrimination in the workplace
• make reasonable adjustments to your business premises if your employee is disabled

Fixed-term contracts

Fixed-term contracts:

• last for a certain length of time
• are set in advance
• end when a specific task is completed
• end when a specific event takes place

Fixed-term employees must receive the same treatment as full-time permanent staff.

Employees are on a fixed-term contract if both of the following apply:

• they have an employment contract with the organisation they work for
• their contract ends on a particular date, or on completion of a specific task, eg a project

Workers don’t count as fixed-term employees if they:

• have a contract with an agency rather than the company they’re working for
• are a student or trainee on a work-experience placement
• are working under a ‘contract of apprenticeship’
• are a member of the armed forces

They may be a fixed-term employee if they’re:

• a seasonal or casual employee taken on for up to 6 months during a peak period
• a specialist employee for a project
• covering for maternity leave

Agency staff

As an employer, you can hire temporary staff through agencies. This means:

• you pay the agency, including the employee’s National Insurance contributions (NICs) and Statutory Sick Pay (SSP)
• it’s the agency’s responsibility to make sure workers get their rights under working time regulations
• after 12 weeks’ continuous employment in the same role, agency workers get the same terms and conditions as permanent employees, including pay, working time, rest periods, night work, breaks and annual leave
• you must provide the agency with information about the relevant terms and conditions in your business so that they can ensure the worker gets equal treatment after 12 weeks in the same job
• you must allow agency workers to use any shared facilities (for example a staff canteen or childcare) and give them information about job vacancies from the first day they work there
• you are still responsible for their health and safety

Freelancers, consultants and contractors

If you hire a freelancer, consultant or contractor it means that:

• they are self-employed or are part of other companies
• they often look after their own tax and National Insurance contributions (NICs)
• they might not be entitled to the same rights as workers, such as minimum wage
• you’re still responsible for their health and safety

Zero-hours contracts

Zero-hours contracts are also known as casual contracts. Zero-hours contracts are usually for ‘piece work’ or ‘on call’ work, for example for interpreters.

This means:

• they are on call to work when you need them
• you do not have to give them work
• they do not have to do work when asked

Zero-hours workers are entitled to statutory annual leave and the National Minimum Wage in the same way as regular workers.

You cannot do anything to stop a zero-hours worker from getting work elsewhere. The law says they can ignore a clause in their contract if it bans them from:

• looking for work
• accepting work from another employer

You are still responsible for the health and safety of staff on zero-hours contracts.

Employing family, young people and volunteers

Trial Period

There is no legal stipulation for minimum and maximum probation periods and all statutory rights and protections apply from commencement of employment. Employers can set probationary periods in the employment contract. It is typical for a probationary period to last no longer than six months, and three months where an employee is moving to a new post internally.

Working hours & overtime

You only have to work overtime if your contract says so.

Even if it does, by law, you cannot usually be forced to work more than an average of 48 hours per week. You can agree to work longer – but this agreement must be in writing and signed by you.

Unless your contract guarantees you overtime, your employer can stop you from working it.

However, your employer cannot discriminate against anyone, for example by stopping some employees from working overtime while letting others do so.

Minimum Wage

In the United Kingdom, the National Living Wage depends on the age of the worker. In April 2022, the national minimum wages were updated to the following hourly rates:

• 23 and over: £9.50
• 21 to 22: £9.18
• 18 to 20: £6.83
• Under 18: £4.81
• Apprentice: £4.81

Payroll cycle

Payroll in the UK can be run monthly, which is usual in the UK, or on a weekly basis if preferred.

Taxes

Employer’s contribution

The employer cost is generally estimated at 18.55% of the employee salary.

• Minimum 4% – Pension Fund
• 13.80% – National Insurance Rate
• £60.32 – Employer Liability Insurance
• 0.50% – Monthly Apprentice Levy

Employee’s contribution

• Minimum 5% – Pension Fund

Personal Income Tax Rates

• 0% – Up to 11,850
• 20% – 11,850-46,350
• 40% – 46,350-150,000
• 45% – Over 150,000

Types of leave

Statutory leave

Full-time workers in the UK are entitled to 28 total working days of annual leave. These often include the 8 public/bank holidays which would otherwise be unpaid.

Pregnancy and maternity leave

52 weeks, with the two first weeks mandatory for the mother. Comprising ordinary maternity leave for the first 26 weeks and additional for the last 26 weeks.

Parental/paternal leave

Employees can choose to take either one week or two weeks consecutive leave. Leave cannot start before the birth. Mother can transfer up to 50 weeks of leave to partner, with up to 37 weeks of pay between the couple.

Other leave

• Time off work for public duties: intended to allow employees to fulfill certain public duties related to holding roles such as local councillor, school governor, trade union member, etc.
• Time off for family and dependents: intended for unforeseen personal circumstances for which an employee has to take time off immediately. Has to be an emergency and involve a dependent.

Notice period

Notice period depends on the length of the employment relationship. For up to 4 years of employment, the notice period is no less than 1 month. For 5 to 11 years of employment, the notice period is no less than 1 week’s notice for every year of completed year of continous employment. Above 12 years, it is no less than 3 months.

Termination of employment

Termination from the employer valid grounds with any fair reasons. There are six potentially fair reasons for dismissals:

• Employee’s capability or qualifications for performing work of the kind the employee was employed to do;
• Employee conduct;
• Employee retirement;
• Employee redundancy;
• Employee could not continue work in position without contravening statutory duty or restriction; or
• Other substantial reason justifying dismissal

The United Kingdom is a unitary parliamentary democracy and constitutional monarchy. The monarch, Queen Elizabeth II, has reigned since 1952. The capital and largest city is London, a global city and financial centre with a metropolitan area population of over 14 million. Other major cities include Birmingham, Manchester, Glasgow, Liverpool and Leeds. The United Kingdom consists of four countries: England, Scotland, Wales and Northern Ireland. Other than England, the constituent countries have their own devolved governments, each with varying powers.

The United Kingdom has evolved from a series of annexations, unions and separations of constituent countries over several hundred years. The Treaty of Union between the Kingdom of England (which included Wales, annexed in 1542) and the Kingdom of Scotland in 1707 formed the Kingdom of Great Britain. Its union in 1801 with the Kingdom of Ireland created the United Kingdom of Great Britain and Ireland. Most of Ireland seceded from the UK in 1922, leaving the present United Kingdom of Great Britain and Northern Ireland, which formally adopted that name in 1927.

The United Kingdom has evolved from a series of annexations, unions and separations of constituent countries over several hundred years. The Treaty of Union between the Kingdom of England (which included Wales, annexed in 1542) and the Kingdom of Scotland in 1707 formed the Kingdom of Great Britain. Its union in 1801 with the Kingdom of Ireland created the United Kingdom of Great Britain and Ireland. Most of Ireland seceded from the UK in 1922, leaving the present United Kingdom of Great Britain and Northern Ireland, which formally adopted that name in 1927.