Global Payroll and Benefits — 7 min
Companies in the UK must offer a specific set of employee benefits to remain compliant with UK labor laws. This is especially important for foreign employers of remote UK workers who may not be familiar with common benefits in the UK.
To compete for top UK talent, businesses should offer a more competitive benefits package that goes beyond the basic requirements. Remote’s guide on hiring remote workers in the UK covers a variety of topics on UK employment, payroll, benefits, and labor laws. In this article, we will examine a variety of statutory, standard, and premium benefits in the UK.
Employees and workers (two distinct terms) are entitled to statutory benefits in the UK. Employees meet the traditional definition of full-time workers and sign employment contracts with their employers. Workers operate in a gray area between contractors and employees. Some companies that have attempted to classify workers as contractors have run into trouble under UK laws.
For more information on employers and workers, view Remote’s introduction to UK labor laws. Remote helps businesses avoid classification troubles with an employer of record solution that guarantees full compliance with all UK labor laws.
Workers in the UK are entitled to a minimum of 20 paid days off plus eight paid public holidays. Employers are required to pay employees for holiday leave but are not required to pay overtime for employees who choose to work on holidays. To attract top talent, many employers choose to offer more than the minimum 28 days.
Northern Ireland has two extra public holidays for a total of 10 paid holidays.
Employees in the UK may only roll over a maximum of eight PTO days per year in most circumstances. Employees forced to take another kind of leave (such as long-term sick leave) may roll over up to 20 days.
Employers are required to pay out unused PTO if an employee leaves during the middle of the year, up to the amount the employee has accrued during the current year.
Businesses with UK workers can offer unlimited PTO, but they must ensure their employees take enough time off. Employers who do not track PTO for workers in their home country must track PTO for workers in the UK to remain compliant with UK law.
The UK minimum wage depends on the age of the worker. Teenagers from 16-17 may work for a minimum of £4.15 per hour, while those older than 25 years old may not work for less than £8.72 per hour. This wage for workers aged 25 years and up is referred to as the National Living Wage.
Note that the UK government does not mandate overtime pay for workers. Companies often choose to include overtime pay in employment contracts if the job regularly requires overtime work.
UK employees may miss up to one week of work without needing to provide a doctor’s note, also called a “fit note.” After one week, however, the sick employee must provide the employer with a document from a doctor verifying the illness.
Statutory sick pay, also known as long-term sick pay, provides workers with £95.85 per week and is paid by the employer. If the employee remains ill, the employer must pay statutory sick pay for a duration of up to 28 weeks. Employment contracts can extend this time period but cannot shorten it.
Although a worker on long-term sick leave cannot be forced to work, workers continue to accrue PTO during their absence as if they were at work. If an employee chooses to quit after several weeks of sick leave, the employer must pay out unused PTO accrued up to the day of departure, not up to the day the illness began.
Maternity leave in the UK is split into two parts: ordinary maternity leave and additional maternity leave. Ordinary maternity leave in the UK lasts for the first 26 weeks, while additional maternity leave adds another 26 possible weeks, for a total of 52 weeks of leave. Expecting mothers may begin to take their leave 11 weeks prior to the due date. Mothers are required by UK law to take at least two weeks of leave after the birth of the child.
Employers are required to pay 90% of the mother’s average wages for the first six weeks of maternity leave. For the next 33 weeks, employers must pay the lesser of 90% of average earnings or £148.68 per week. Employers do not have to pay for the final 13 weeks of maternity leave, but mothers are still entitled to that leave if they do not need to return to work.
A mother wishing to change the return-to-work date must provide at least eight weeks’ notice to the employer.
Mothers do not need to work for any minimum period of time to be eligible to take the full amount of maternity leave allowed by law.
Paternity leave in the UK is much shorter than maternity leave at just two weeks. Paternity leave may not begin before the birth of the child, but employees may use paternity leave any time during the child’s first year of birth, provided the leave is taken consecutively.
Partners of pregnant employees are eligible for paternity leave regardless of gender. To qualify for paternity leave, the employee must be one or more of:
While mothers taking maternity leave are not required to work for a minimum length of time before becoming eligible, paternity leave requirements enforce a minimum of at least 26 consecutive weeks of employment before eligibility begins.
Shared parental leave does not stack on top of maternity and paternity leave, but many families choose to share leave after the birth of a child. Shared parental leave can extend up to 50 weeks with up to 37 weeks paid. Parents do not have to take shared parental leave at the same time, or even consecutively, but must use the time within the first year after the birth.
Employers of UK workers are required by law to contribute a minimum of 3% of every worker’s salary toward a pension plan. Employees must contribute a minimum of 5% of their salary toward the plan. Employment contracts can increase these contributions but not decrease them.
Plans vary, but most fall into two categories: defined contribution schemes and defined benefit schemes. In defined contribution schemes, the amount of future payments increases based on how much the employee puts in. These operate similarly to 401(k) plans in the US. In defined benefit schemes, employees still contribute a set amount, but the amount paid does not depend on the amount contributed. Instead, the payments upon retirement are based on other factors, like how long the employee worked for the company and their highest level of seniority achieved.
In most cases, employers automatically enroll employees in pension contributions, provided the employees are between the ages of 22 and 66 and earn at least £10,000 per year. Employers can postpone pension enrollment for up to three months, but to do so, they must notify the worker of the postponement in writing and have a legally valid reason to postpone.
The UK government provides health insurance for all citizens through the NHS. However, some companies attract top talent by offering premium private health insurance as part of the total compensation package. Private health insurance may provide access to clinics with shorter wait times or cover more elective procedures. Employers often give employees a cash stipend to use to find their own private plans.
Because the NHS and private health plans do not cover a few specific types of care, some employers offer additional insurance as part of employees’ compensation. These insurance offerings can include dental insurance, vision insurance, fertility support, specialized disability support, and others outside the coverage zone of standard health care.
Remote is the expert on all things global employment. We can help you provide your team in the UK with a superior benefits package to ensure your company can attract and retain the top talent in your field. Contact us today at [email protected] to learn more about our UK employer of record and contractor management solutions.
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