United Kingdom PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in the United Kingdom to companies willing to enter the United Kingdommarket or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in the United Kingdom.  However our solution allows you to start the operations in the United Kingdom within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

United Kingdom fast facts

Population, million: 27,88

Land area, sq. km: 242,495 km2

Capital: London

Local currency: Pound sterling (GBP)

Hiring, Negotiating and Doing Business in the United Kingdom

Necessity of written employment contract

An employer must give each employee a written statement of the particulars of his/her employment within two months of employment starting. The statement must contain:

• Names of the employer and employee.
• The employee’s job title or a brief description of his/her role.
• The employee’s start date (and when his/her continuous employment began, if earlier).
• The place of work, and (if different) the employer’s address.
• How much and how often the employee will be paid.
• Terms and conditions relating to hours of work.
• Terms and conditions relating to holiday entitlement.
• Terms and conditions relating to sickness absence and sick pay.
• Terms and conditions relating to pensions (including whether the employee’s pension is covered by a contracting-out certificate).
• Notice periods to terminate employment.
• For a non-permanent employee, how long the contract is expected to continue (or if it is for a fixed term, the date on which it will end).
• Details of disciplinary and grievance procedures that apply to the employee.
• Details of collective agreements that apply to the employee.

Certain further information must also be provided to employees expected to work outside the UK for periods of more than one month.

United Kingdom Employment Contract

Types of employment agreements

An individual may be an employee, a worker, or self-employed. The distinction is important, as it determines an individual’s statutory employment rights, and how he/she is taxed.

Assessing an individual’s status is not just determined by how the parties label the relationship. It is a question of law and fact.

An employee is an individual who has entered into, or works under, a contract of employment. A contract of employment may be in writing, but can also be found to exist by virtue of how matters operate in practice. In determining whether an individual is an employee, an Employment Tribunal will assess his/her integration into the workforce, considering, in particular:

• The degree of day-to-day control exerted over the individual by the business.
• Whether the business is obliged to provide work for the individual, and he/she is obliged to do it.
• Whether the individual is required to provide services personally or can send a substitute.

United Kingdom working hours

Workers are not generally permitted to work more than 48 hours per week (normally averaged over a 17-week period). However, most workers can, and do, opt out of this limit, although they can opt back in at any time, by giving written notice to the employer. The minimum notice required by statute is seven days, but this can be extended to up to three months by the contract of employment.

Vacation in the United Kingdom

All workers have the right to 5.6 weeks’ paid holiday each year. For these purposes, a week means a normal working week for that individual (although the maximum statutory entitlement is 28 days, regardless of how long the normal working week is). If a worker starts or ends work part way through a holiday year he/she is entitled to paid holiday on a pro rata basis.

Holiday pay is paid at the same rate as normal pay, and should include any elements of pay directly linked to the work that the worker is required to carry out. Recent case law indicates that this may include, among other things, commission, shift allowances and at least some forms of overtime (notably, where there is a settled pattern of work and a correspondingly regular overtime payment, whether compulsory or voluntary), at least in respect of the 20 days’ holiday conferred by the underlying European legislation.

It is unlawful to pay a worker in lieu of holiday entitlement except on termination, when a payment can be made in lieu of holiday that has accrued but not been taken.

Sick leave: 

Entitlement to paid time off

Employees who are unable to work due to illness or injury for four or more consecutive days are entitled to receive statutory sick pay (SSP), provided they meet the qualifying conditions. Employees do not receive SSP for the first three days of any sickness absence. The current weekly rate of SSP (from 6 April 2017) is GB£89.35. The maximum entitlement is 28 weeks’ SSP during any period of incapacity for work (or any series of linked periods).

An employee may also be entitled to contractual sick pay (that is, pay during sick leave at a higher rate than SSP) if the employer offers this benefit.

Entitlement to unpaid time off

Employees do not have a specific statutory right to take a set period of time off work in the event of illness or injury. However, it is generally recognised that there will be times when an employee is unable to attend work for these reasons.

An employee’s written statement of particulars of employment should contain (or refer to) the terms that apply if he/she is unable to work due to illness or injury, including any sick pay to which he/she may be entitled.

Employers should also be aware that, if an employee becomes ill before or during a period of pre-booked holiday, he/she may request that the time off be re-classified as sick leave, so that he/she can take the holiday at a later date once he/she is well. Employers should ensure that appropriate measures are put in place for the reporting of sickness, and supporting medical evidence, in these circumstances to guard against potential abuse.

United Kingdom Maternity Leave

Currently, all pregnant employees are entitled to both:

• 26 weeks’ ordinary maternity leave (OML).
• 26 weeks’ additional maternity leave (AML).

Employees do not have to take all 52 weeks of their maternity entitlement, but must take two weeks’ compulsory leave directly after the baby is born (or four weeks, in the case of some factory workers).

Employees entitled to take maternity leave are also entitled to receive up to 39 weeks’ statutory maternity pay (SMP) if they meet the requirements for:

• Length of service (at least 26 weeks’ continuous service at the end of the 15th week before the expected week of childbirth (EWC)).
• Minimum earnings (which must be above the lower earnings limit for National Insurance contributions (NICs), currently GB£113 per week).

United Kingdom Severance Laws

Notice periods

All employees are entitled to receive from their employer the minimum notice of termination to which they are entitled by statute.

An employee who has been continuously employed for more than one month but less than two years is entitled to receive one week’s notice. Thereafter, he/she is entitled to receive an additional week’s notice for each complete year of service, up to a maximum of 12 weeks. By contrast, the statutory minimum notice that an employee must give to his/her employer does not increase with time but remains fixed throughout employment at one week.

It is common for employment contracts to provide for notice periods that exceed the statutory minimum, in which case the longer contractual period will apply. Employment contracts also often give employers the discretionary right to make a payment in lieu of an employee’s notice period, although care should be taken in drafting and exercising such provisions.

An employee may be dismissed summarily (that is, without any notice period) if he/she commits a repudiatory breach of the employment contract that would justify this (for example, gross misconduct).

Severance payments

An employee who has been continuously employed by his/her employer for two years is entitled to a statutory redundancy payment (SRP) if he/she is dismissed on grounds of redundancy. SRP is calculated in accordance with a statutory formula based on the employee’s age, salary and length of service 

There are no further statutory rights to severance payments, although an individual’s employment contract may provide for some form of severance payment. On termination, the employee is entitled to any amounts he/she has accrued under the contract that have not yet been paid.

An employee who has the required length of service and brings a successful claim for unfair dismissal may also be awarded a compensation payment. This will consist of:

• A basic award (calculated in the same way as SRP but only payable if the employee has not already received this).
• A possible compensatory award based on an employee’s actual and/or potential future financial loss. This is currently capped at the lower of GB£80,541, or 52 weeks’ actual gross pay at the time of dismissal.

United Kingdom Tax

Rate of taxation on employment income

Income tax is charged at graduated rates, with higher rates of income tax applying to higher bands of income. Tax is charged on total income (from all earned and investment sources) less certain deductions and allowances. The main allowance is the personal allowance, which is GBP 12,500 in 2019/20 and 2020/21. Most individuals can claim a personal allowance, unless they are claiming the remittance basis (see below) or their income is over GBP 100,000. The net amount after allowances is usually referred to as an individual’s taxable income. The graduated rates of income tax vary slightly depending on whether the income is from earnings or investments.

Income tax bands and rates are as follows:

* The 0% starting rate is for savings income only. If non-savings income (which takes up the first ‘slice’ of income) is above this limit, then the 0% starting rate will not apply.

Note that dividends are always treated as the top slice of income and will be taxed at an individual’s highest marginal tax rate (see Dividend income in the Income determination section for rates specifically applicable to dividends). ‘Savings income’ is the next slice down, and other income (such as earnings) will be the lowest slice. The most common form of ‘savings income’ is interest, but certain other forms of income are also included.

A dividend allowance applies to the first GBP 2,000 of an individual’s dividend income in 2020/21. The allowance operates as a 0% tax rate.

The dividend allowance does not reduce total income for tax purposes. Dividend income that is within the ‘allowance’ still counts towards an individual’s basic and higher rate limits.

Social security contributions

Social security payments are termed ‘national insurance contributions’ (NICs) in the United Kingdom. These are payable by employers, employees, and those that have their own trades (the self-employed).

The main rate of NIC applies to employees’ salaries (excluding benefits in kind) up to GBP 962 per week for 2020/21 (the ‘upper earnings limit’) (GBP 962 in 2019/20). No contributions are payable on the first GBP 183 per week (GBP 166 in 2019/20); thereafter, between GBP 183.01 and GBP 962 per week, contributions amount to 12%. Earnings above the upper earnings limit attract a 2% charge.

Employers pay NIC on their employees’ salary at 13.8%. Employer NIC at 13.8% also applies to benefits in kind provided to employees (such as accommodation) as well as salary.

Employers are not required to pay Class 1 secondary NIC on earnings paid up to the upper earnings limit to any employee under the age of 21. This also applies to employers of apprentices under the age of 25.

Additional Benefits in the United Kingdom

It is entirely up to an employer what bonus to pay or whether to pay a bonus at all. Some employers operate structured bonus plans which might, for example, be linked to corporate and/or personal performance. Others might operate an undocumented discretionary bonus policy under which any payments are variable. Practice varies between industries.

United Kingdom Holidays

• New Year’s Day
• Good Friday
• Easter Monday
• Early May Bank Holiday
• Spring Bank Holiday
• Summer Bank Holiday
• Christmas Day
• Boxing Day

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.