Effortless Hiring in United Kingdom

Employment Laws

The primary legislation governing employment practices in the UK includes:

• The Employment Rights Act 1996: This act outlines employees' rights regarding unfair dismissal, redundancy, and employment contracts.
• The Equality Act 2010: This legislation prohibits discrimination based on protected characteristics such as age, disability, gender reassignment, race, religion or belief, sex, and sexual orientation. It ensures that all employees receive equal treatment and opportunities.

Onboarding Process

Employers typically require the following during the onboarding process:

• Proof of the right to work in the UK: This can include a passport or visa.
• National Insurance Number: Necessary for tax and social security contributions.
• Banking details: For salary payments.
• Signed employment contract: This document must detail the terms and conditions of employment, including job responsibilities, pay, working hours, and leave entitlements.

Types of Employment Contracts

1. Permanent Contracts:

• These contracts are for an indefinite duration and include full benefits such as paid leave and pension contributions.

2. Fixed-term Contracts:

• Employment for a specified period or task. These contracts automatically terminate upon completion of the specified duration.

3. Temporary Contracts:

• Short-term assignments typically arranged through employment agencies. These contracts may not include all benefits provided to permanent employees.

4. Zero-hours Contracts:

• These contracts do not guarantee any minimum hours of work; instead, employees work as needed. This type of contract provides flexibility for both employers and employees but can lead to uncertainty regarding income.

Payroll Frequency

• Employees in the UK are commonly paid monthly, though weekly or bi-weekly payments are also practiced. Monthly payroll is the most prevalent method, especially for salaried employees, while weekly pay is often used in sectors with variable hours, such as hospitality and retail.

Minimum Wage

As of April 2024, the National Minimum Wage rates are as follows:

• Aged 23 and over: £11.44 per hour (National Living Wage)
• Aged 21 to 22: £10.18 per hour
• Aged 18 to 20: £8.60 per hour
• Under 18: £6.40 per hour
• Apprentice: £6.40 per hour

These rates ensure that employees receive at least the minimum compensation for their work, with adjustments made annually.

Payroll Deductions

Employers are responsible for deducting several statutory contributions from employees' salaries:

1. Income Tax (PAYE):

• The UK employs a progressive income tax system with rates effective from April 2024 ranging from 20% to 45%, depending on income levels. The basic structure is as follows:
• Up to £12,570: 0% (Personal Allowance)
• £12,571 to £50,270: 20%
• £50,271 to £150,000: 40%
• Above £150,000: 45%

2. National Insurance Contributions (NICs):

• Both employers and employees contribute to National Insurance, which funds state benefits and pensions. The contribution rates vary based on earnings as of April 2024:
• Employees pay Class 1 NICs at a rate of 12% on earnings between the Primary Threshold (£12,570) and Upper Earnings Limit (£50,270), and 2% on earnings above that.
• Employers pay Class 1 NICs at a rate of 13.8% on earnings above the Secondary Threshold (£9,100).

3. Pension Contributions:

• Employees are automatically enrolled into a workplace pension scheme under the auto-enrollment regulations effective from April 2024. The minimum contribution rates include:
• Total minimum contribution: 8% of qualifying earnings (with at least 3% from the employer).

Cadana's Role in Simplifying Payroll Management in United Kingdom

Cadana offers comprehensive payroll solutions that ensure compliance with UK’s labor laws, accurate calculation of salaries and deductions, and timely remittance of statutory contributions.

Employee Income Tax

The UK employs a progressive income tax system for individuals, with the following tax brackets effective from April 2024:

• Personal Allowance: Up to £12,570 – 0%
• Basic Rate: £12,571 to £50,270 – 20%
• Higher Rate: £50,271 to £125,140 – 40%
• Additional Rate: Over £125,140 – 45%

These rates ensure that individuals are taxed progressively based on their income levels, with higher earners paying a larger percentage of their income in taxes.

Employer Contributions

1. Employer National Insurance Contributions (NICs):

• Employers must pay 13.8% on earnings above the secondary threshold (£9,100 as of April 2024). This contribution funds state benefits and pensions.

2. Apprenticeship Levy:

• The Apprenticeship Levy is charged at 0.5% of an employer's annual pay bill for employers with a pay bill exceeding £3 million. This levy was introduced on 6 April 2017 to fund apprenticeship programs across the UK.

• Employers receive an annual allowance of £15,000, which means they only pay the levy if their annual pay bill exceeds £3 million after accounting for this allowance.

• The levy is reported and paid monthly alongside other PAYE liabilities.

Types of Leave in United Kingdom

1. Annual Leave

• Employees in the UK are entitled to a minimum of 28 days of paid annual leave, which includes public holidays. This entitlement is based on a full-time working schedule and can be pro-rated for part-time employees.

2. Parental Leave

• Maternity Leave:

• Employees are entitled to up to 52 weeks of statutory maternity leave. The leave is divided into:

• 26 weeks of ordinary maternity leave (OML).

• 26 weeks of additional maternity leave (AML).

• During this period, employees may receive Statutory Maternity Pay (SMP) for up to 39 weeks, with varying pay entitlements: 90% of average weekly earnings for the first six weeks, followed by a flat rate or 90% of average earnings, whichever is lower.

• Paternity Leave:

• Fathers or partners are entitled to up to 2 weeks of paid paternity leave following the birth or adoption of a child. Statutory Paternity Pay (SPP) is available at a rate of £184.03 per week or 90% of average weekly earnings, whichever is lower.

3. Shared Parental Leave (SPL):

• Parents may share up to 50 weeks of leave after the birth or adoption of a child. SPL allows parents to take time off together or separately, providing flexibility in how they manage their childcare responsibilities. Up to 37 weeks of pay may also be shared at the same rate as SPP.

4. Sick Leave:

• Employees are entitled to Statutory Sick Pay (SSP) for up to 28 weeks, subject to eligibility criteria. SSP is paid at a flat rate (£109.40 per week as of April 2024) for eligible employees who are off work due to illness.

5. Public Holidays The UK observes several public holidays, which may vary slightly by region, but commonly include:

• New Year's Day
• Easter Monday
• May Day
• Spring Bank Holiday
• Summer Bank Holiday
• Christmas Day
• Boxing Day

Mandatory Benefits

1. Pension Contributions:

• Employers are required to automatically enroll eligible employees into a workplace pension scheme under the auto-enrollment regulations. Employees aged 22 and above earning at least £10,000 per year must be enrolled. The minimum contribution rates include:
• Employer contribution: 3% of qualifying earnings.
• Employee contribution: 5% of qualifying earnings.
• The total minimum contribution is 8%.

2. National Insurance Contributions (NICs):

• Both employers and employees contribute to the National Insurance scheme, which funds state benefits such as pensions, sick pay, and maternity benefits. Employers typically contribute 13.8% on earnings above the secondary threshold.

3. Statutory Leave Entitlements:

• Employees are entitled to various types of statutory leave, including:
• Maternity Leave: Up to 52 weeks, with pay entitlements varying based on the duration of leave.
• Paternity Leave: Up to 2 weeks of paid leave.
• Sick Leave: Statutory Sick Pay (SSP) is available for up to 28 weeks, subject to eligibility criteria.

Supplemental Benefits

Employers may offer additional benefits to attract and retain talent, which can include:

• Private Health Insurance: Coverage for medical needs not provided by the National Health Service (NHS), allowing quicker access to healthcare services.
• Company Cars: Some employers provide vehicles for business use, which may also be available for personal use.
• Performance Bonuses: Financial incentives based on employee performance or company profitability.
• Flexible Working Arrangements: Options for remote work or flexible hours to improve work-life balance.
• Childcare Vouchers or Assistance: Support for employees with children, helping to alleviate childcare costs.

Process

Termination must be based on fair reasons such as:

• Misconduct: Involves behavior that violates workplace policies.
• Capability: Refers to an employee's inability to perform their job duties effectively.
• Redundancy: Occurs when an employee's position is no longer necessary due to organizational changes.
• Statutory Restriction: Situations where continuing employment would contravene legal requirements.

Employers are required to follow a fair procedure, which may include:

• Providing warnings.
• Allowing the employee an opportunity to respond to any allegations or concerns.

Notice Period

The statutory notice period for termination is determined by the length of service:

• Less than 1 month of service: No statutory notice required.
• 1 month to 2 years of service: 1 week's notice.
• 2 years or more: 1 week's notice for each year of service, up to a maximum of 12 weeks.

This structure ensures that employees are given adequate time to prepare for their departure, regardless of the reason for termination.

Severance Pay

In cases of redundancy, employees are entitled to statutory redundancy pay, which is calculated based on:

• Age of the employee.
• Length of service.
• Weekly pay, subject to a cap. As of April 2024, the weekly pay cap is £643, and the length of service is capped at 20 years. The redundancy pay is calculated as follows:
• Half a week’s pay for each full year for employees under the age of 22.
• One week’s pay for each full year for employees between the ages of 22 and 41.
• One and a half weeks’ pay for each full year for employees over the age of 41.