To download a PDF version of this document, click here
Date of publication: January 2012
UK employment law is complicated. Whilst individuals can be classified as consultants and therefore self-employed, on the whole individuals are deemed employees and therefore entitled to various rights.
All employees are entitled to a basic statement of their terms and conditions of employment which must be provided within 2 months of commencing employment. We recommend that a contract of employment is provided to employees to protect the business and clearly set out the relationship between the parties.
Probationary period; job description; reporting structure; benefits (such as private health insurance/death in service/pension contributions) details of incentives, bonuses or commissions should also be clearly defined. Confidentiality provisions, restrictions following termination and protecting the goodwill of the business should be considered and incorporated.
Pensions: If a business employs 5 or more individuals, it is legally obliged to set up a stakeholder pension scheme for employees. The company does not have to contribute to this scheme. Please note from October 2012 onwards, new rules will require companies to have contributing pension schemes. The new rules will be on a staged basis beginning with larger companies.
Benefits: Businesses are not obliged to provide any benefits such as living allowances, private health care, death in service or pension contributions. If benefits are provided they are taxable.
Claims in the Employment Tribunal: Claims in the UK are common as an ex-employee can issue a claim without paying a fee and without having to prove merit. Even if a claim against an employer is unsuccessful it is rare for the employer to recover the costs they have incurred in defending the claim.
The largest number of claims is for unfair dismissal. In the UK employers must have a statutory or fair reason to dismiss the individual (conduct, capability, redundancy, retirement (about to be repealed), statutory illegality and “some other substantial reason”) and must follow a set statutory fair procedure to terminate employment (or even to discipline an employee). If this is not followed the individual may have a right to issue a claim that they have been unfairly dismissed. The maximum award for unfair dismissal is currently £72,300.
Discrimination: If an employee succeeds in a discrimination claim (for example, on the grounds of gender, race, age or disability) a Tribunal award is uncapped so can be very expensive.
Maternity/Paternity leave: Maternity leave of up to 52 weeks is permitted in the UK, 39 weeks of which the employee will be entitled to Statutory Maternity Pay (SMP). SMP consists of 90% of the employee’s average weekly wage for the first 6 weeks and then a statutory amount, currently £128.73 (£135.45 per week from April 2012) for the remaining 33 weeks. Please note in the UK a pregnant woman can take a whole year off work and then is entitled to return to work in the same/similar role.
Paternity leave of up to 2 weeks can be taken at the same rate as for statutory SMP, currently £128.73 per week (£135.45 per week from April 2012).
Paperwork: Having appropriate offer letters, reference checks (including checking the employee is entitled to work in the UK – by seeing a passport / checking the correct visa documentation) and a full contract of employment is highly recommended.
People represent the highest cost to most businesses and carry the highest risk, so please obtain advice to reduce the risk exposure.
This guide does not contain a full statement of the law and it does not constitute legal advice. Please seek legal advice if you have any questions about the information set out above.