Home to one of the world’s most important financial centers, the United Kingdom is now seeing new startups pop up in areas such as insurtech, edtech, and alternative finance. It’s too early to know how Brexit will affect the United Kingdom in the long run. Regardless, many employers are still interested in hiring people based in the country. The United Kingdom’s impressive education system and diversity make it one of the most appealing countries to find top talent.
In the UK, the National Insurance Contribution requires employers to provide their employees with substantial compensation and benefits packages. So, having a strong employment contract is not only legally required by the British government, but important to protect yourself as an employer.
As an employer looking to recruit top British talent, you need to understand what employee benefits are required , as well as some of the common supplemental employee benefits that you can offer (such as a work-from-home stipend for office supplies) to attract and retain the best talent.
Employers in the UK contribute (alongside their employees) to the British social security system through taxes. This social security system is known as the National Insurance Contribution (NIC).
Employers contribute a total of 18.5% towards the NIC.
National Insurance Contributions for employees are based on the following category letters:
A: Most employees contribute this much (except for those that fall into the below categories)
B: Married women or widows entitled to pay reduced NIC
C: Employees of state pension age
J: Employees who can defer NIC to it being deducted from another job
H: An apprentice under the age of 25 years old
M: Employees under the age of 21 years old
Z: Employees under the age of 21 years old who can defer NIC due to it being deducted from another job
For annual leave, employees are entitled to 28 days per year if they work full-time. Bank holidays are included in the annual leave entitlement.
Some employers may offer additional leave as an employee benefit, but these stipulations must be defined in their employment contracts.
There are 8 public holidays in England, Wales, and Scotland. For Northern Ireland, there are the same 8 holidays, with 2 additional bank holidays for St. Patrick’s Day and Orangemen’s Day. Employers are required by law to give employees these holidays off as an employee benefit.
The standard 8 national holidays in the United Kingdom are:
New Year’s Day
Early May bank holiday
Spring bank holiday
Platinum Jubilee bank holiday
Summer bank holiday
Employees are eligible to receive up to 28 weeks of paid statutory sick leave, compensated at 99.38 GBP per week. This cannot be paid out for the first 3 days of illness.
If an employee is unable to work after 7 days, they are required to provide a doctor’s note to continue to receive their statutory sick leave from the NIC.
Some employees may be entitled to higher than statutory pay, if the employer offers this option in the conditions of the employment contract.
Female employees can receive up to 52 weeks of statutory maternity leave. This leave can be taken as 26 weeks of ordinary leave and 26 weeks of additional maternity leave.
Employees are not required to use the full 52 weeks. However, they are required to take at least 2 weeks following the child’s birth. This required amount may vary depending on the employee's job sector.
New mothers are paid through the statutory maternity pay (SMP) system. This is paid out for up to 39 weeks at 90% of the employee’s average weekly earnings for the first 6 weeks. After the first 6 weeks, employees are paid either 156.66 GBP or 90% of their average salary weekly (whichever is lower) for the following 33 weeks.
New fathers are allowed 1-2 weeks of leave that must begin after the child’s birth. They are compensated through statutory paternity pay (SPP) at either 156.66 GBP or 90% of their average weekly earnings (whichever is lower).
New parents may be entitled to shared parental leave (SPC) when either adopting a child or following the birth of a child.
Shared parental leave is good for up to 50 weeks and can be shared between both parents. 37 weeks of parental leave pay is possible. However, they must take leave within the first year of the child’s birth.
Employers can choose to give other leave, but the definitions of this leave must be stipulated in the employment contract. In general, these are the standard practices for other leave:
Bereavement leave in the case of the death of an immediate family member is 3 days. The employment contract should say whether it is paid or unpaid
Jury leave must be provided as unpaid leave for any type of jury summons. You must show your employer the summons to be approved for leave
The standard work week in the UK is 40 hours; anything over 40 hours is considered overtime pay. Overtime cannot exceed a maximum of 48 hours, averaged over 17 weeks.
Anything above the standard working week is to be paid overtime and regulated by the employment contract, as employers are not legally required to pay employees a standard overtime pay amount.
The same regulations apply to holiday, nighttime and premium pay. Employers either include these requests in the employment contract or in writing if they want an employee to work any of these extra hours. They are not legally required to pay a certain amount, as long as they pay over the minimum wage.
The HM Revenue and Customs regulates travel allowances in the UK. If any expenses go over the HMRC limit of what is within the employee’s regular duties or they have to stay away from their office for travel, then they are entitled to tax reimbursements.
Employees can claim per diems for:
Meals like lunch, breakfast, and dinner
Hotels and expenditures for traveling for work
Air and rail travels
While there are a number of compensation benefits that employees are entitled to, employers should consider offering supplemental benefits to their employees to both attract top talent and reward their employees for their hard-work.
Employees have basic public medical insurance through the National Insurance Contribution. Employers should consider offering their employees extended and private plans to give them more coverage and better access to physicians.
Social security in the UK does not offer a basic dental plan. Giving your employees a dental plan will make it so they don’t have to go out of their way to acquire a dental plan themselves.
The NIC already requires that employees pay into their social security. However, many employers opt to give their employees retirement savings through the company, usually through a Cash ISA. This allows employers to reward employees through different pension schemes for their work, and many employers will match employee contributions, like a 401k in the United States.
Unlike many other countries in Europe, the UK does not have a mandatory 13th-month salary that employers must offer to their employees. Still, many employers give a 13th-month salary at the end of the year as a bonus incentive to increase productivity in the workplace
To pay workers abroad, you will need to open an entity or partner with an EOR like Via that already has entities established within the country. Opening an entity can take a few months and requires in-depth knowledge about employment laws and tax laws within the UK. You will also need ample resources and time to open a subsidiary or entity.
As your own employer-of-record, you will pay your own independent contractors and employees in British Pounds. Paying independent contractors can be tricky because specialized contractors don’t need to be put onto the payroll, but they do need to pay out income taxes at the end of the year. You also need to worry about how you classify employees, to avoid any future financial liability or fines.
As most benefits are mandated by the British government, knowing what mandatory and supplementary benefits to offer potential employees is a must. This is where using a global EOR service like Via is a strategic move. As your EOR in the UK, we have valuable knowledge about what benefit packages will attract potential employees and allow employers to stay competitive.
Companies of all sizes want to hire employees in the UK, but don’t know how to navigate the country’s complex social security and benefit system. Via makes hiring British talent and building your global team seamless. With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as work visas & permits, benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-of-record/entity in the UK, Via assumes responsibility for all legal compliance, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time employees or contractors in the UK with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.
No, the UK does not have a legally mandated 13th-month salary that employers must give to employees. But, many employees opt to give employees a 13th-month salary as an extra incentive for their hard work.
Yes, the UK does have workers compensation that employers pay directly to the National Insurance Contributions. This protects employees in the case of work-related injuries or accidents.
There are many examples of compensation and benefits that employers must provide or give supplementary to their employees. Some examples of these are salary, pension, health insurance, and sick leave.
Employees in the UK are paid monthly for their salary based on the salary or minimum wage quoted to them in their employment contract.