What are labor laws like in the UK?

uk union jack flag

Labor laws in the UK, while similar to those in the US, maintain a few important distinctions international employers need to understand. Employers looking to hire employees in the UK should research UK labor laws before moving forward with a new hire, continuing to employ a worker who moves to the UK, or converting a UK contractor into an employee.

What is the difference between an employee and a worker in the UK?

UK labor laws differentiate between “employees” and “workers.” 

Employees in the UK meet all the standard qualifications traditionally associated with full-time workers. Under UK law, anyone who works hours set by an employer, in a location determined by an employer, using methods determined by an employer, or in an otherwise dependent relationship is considered an employee.

In the UK, full-time employees must sign an employment contract with their employers. These employment contracts outline the details of things like benefits, productivity expectations, pension contributions, and other important details. Anything not in the contract is not considered to be part of the agreement between the parties.

Workers are a little fuzzier. In the UK, the term “worker” does not include contractors, but it does include some people who fall between the definitions of employees and contractors. Gig economy companies like Uber are currently fighting against court rulings classifying their drivers as workers, for example.

Workers are entitled to many of the benefits employees receive, including paid holidays, a minimum wage, reasonable breaks, pension contributions, and other rights.

What are the rules on contract workers in the UK?

Self-employed contractors remain independent. Just like contractors anywhere else, UK contractors set their own rates and hours and are not beholden to rules set for them by any employers.

Companies working with UK contractors must be extremely clear about intellectual property rights. Because the UK does not have a work-for-hire concept in the same way the US does, IP rights can sometimes default to creators over clients (in this case, contractors over companies). Because of this, employing workers as employees is often safer than entering into contractor agreements. Remote’s employer of record solution offers the strongest IP protections for employers in the industry.

What is the IR35 rule in the UK?

In the past, some contractors and companies attempted to avoid employee classifications by using personal service companies, or PSCs, as go-betweens. New rules have largely eliminated this loophole by shifting the responsibility of classification corrections from the workers to the employers.

Before the IR35 law changed, a person working as a contractor behind a PSC was responsible for ensuring that relationship was proper and correct. Today, employers are responsible for ensuring that anyone working behind a PSC is doing so correctly and should not be classified as an employee. If the relationship between the contractor and employer would be the same with or without the presence of the PSC as a third party, IR35 applies.

As an employer of record, Remote eliminates this confusion by allowing companies to hire remote workers in the UK as full-time employees with complete legal compliance.

Can employees in the UK join unions?

Yes. UK law guarantees the right for employees to join unions and prohibits employers from discriminating against employees for union membership. Unions and companies working with unions must follow the rules set by the Trade Union and Labour Relations (Consolidation) Act 1992.

How do you terminate an employee in the UK?

Employees in the UK typically do not have special protections against termination until they reach their second year of employment. Employers may usually terminate employees at will during the first two years of employment, outside of protected cases of discrimination including race, philosophical and religious beliefs, and gender.

After two years, employers must provide a “potentially fair reason” to terminate an employee with cause. While this definition sounds broad, UK courts can be strict in their interpretation of the law. Potentially fair reasons must pertain to personal conduct, ability to perform the work required, or other factors that substantially impact the employer-employee relationship.

Employees fired for negligence may be let go immediately depending on the circumstances. For example, an employee whose behavior endangers others is not guaranteed advance notice of termination.

Employees fired for other reasons are entitled to advance notice of termination. Notice periods cover a broad range:

  • One week if the employee has worked longer than one month for the employer
  • Two weeks after two year of employment
  • One month after four years of employment
  • One week for every year of continuous employment from 5-11 years
  • Three months’ notice after 12 years of employment

Companies may not give employees more than 12 weeks’ notice. Many companies choose to give notice by sending terminated employees home and continuing to pay those employees for the duration of the notice period without requiring the employees to come into work.

Many businesses choose to keep employees on probationary periods for the first few months. When terminating an employee during a probationary period, companies are not required to provide advance notice as long as they serve the termination in writing. 

Are terminated employees in the UK entitled to severance pay?

The UK government does not mandate severance pay for employees. However, employees with two years of continuous employment are entitled to “unfair dismissal rights,” by which employees can claim they were let go improperly. If the court finds in favor of the employee, the company may be required to pay one year’s wages to the employee as a penalty, up to a limit of £86,444.

Companies may (and often do) use severance pay as part of a termination agreement to avoid a grievance. In this situation, employees must receive independent legal advice for the agreement to be valid. Remote can support companies during this process.

What work visas do employees need to work in the UK?

Work visas in the UK vary by purpose and qualification. Many of these visas operate based on a points system to determine the qualification level of the applicant.

Citizens of the European Economic Area (EEA) do not always need visas. Citizens of other parts of the world, including the US, almost always do. 

Types of common worker visas include, but are not limited to:

  • Tier 1 Exceptional Talent Visas
  • Tier 2 General Visas, for workers with UK job offers
  • Tier 2 Intra-Company Transfer Visas

If you would like help managing your employees’ visas, contact Remote to learn more.

Understanding labor laws in the UK

Labor laws in the UK continue to evolve in the wake of Brexit, GDPR, the COVID-19 pandemic response, and other important events. Companies hiring remote workers in the UK may discover the rules have changed if they have done business in the country in the past.

Remote makes labor laws in the UK simple. Our employer of record solution keeps businesses in complete compliance with all applicable local labor laws while providing the best-in-class experience for UK remote workers. Contact us today to learn more about our UK employer of record solution.

Build your team,
anywhere in the world.