The complete guide to offering employee benefits in the UK
Mar 30, 2023
So, your business is getting ready to hire employees in the UK. One of the top things to prepare is the benefits package. The rights afforded to workers in the United Kingdom differ greatly from those given to employees in the US, and it’s crucial to ensure you stay compliant with UK Employment Law.
Below, you’ll find everything you need to know to craft a benefits package that not only meets the statutory requirements of the UK labor code but also goes above and beyond to attract and retain top talent in the United Kingdom.
Where can I get quotes for UK employee benefits?
Rippling partners with brokers and insurance carriers around the world to give UK employees access to big business benefits at affordable prices—including health insurance and registered retirement savings plans, etc.
What employee benefits are mandatory in the UK?
Under UK Employment Law, workers who are citizens of the United Kingdom are entitled to an array of mandatory benefits. Should your business fail to include these in the benefits package, whether intentionally or not, it will be subject to legal repercussions. An important note to keep in mind: While these benefits are mandatory for full-time employees, you do not have to offer any benefits to independent contractors. In the United Kingdom, freelancers are responsible for taking care of things like pensions and are not entitled to paid time off. Additionally, while senior employees occasionally receive a heftier benefits package, all full-time workers in the UK are entitled to statutory benefits regardless of their position or how long they’ve been with the company.
The benefits discussed below are statutory minimums. Employers are welcome to offer more than what’s required, and many do.
Workplace pensions are known by many names in the United Kingdom, such as “occupational,” “company,” “works,” or “work-based” pensions. You are required to both offer workplace pension schemes and also automatically enroll employees when they come on board as long as they meet the following criteria:
- They’re between the ages of 22 and 66, which is currently the State Pension Age
- They can be classified as a “worker” (generally, all employees are considered workers, while self-employed contractors are not workers)
- They’re earning a minimum of £10,000 per year
Of course, there are some exceptions. You do not have to automatically enroll employees who are from EU member states or who already have a pension plan that’s worth the lifetime allowance or more. You cannot, however, refuse to allow these employees to join your work-based pension scheme if they wish.
The minimum amount employers and employees–combined–are required to contribute to employee pensions is 8% of the staff member’s earnings. Under UK Employment Law, employers are responsible for at least 3% of this number. You are permitted to contribute more and may find the total you put towards workplace pension schemes differs from the legally mandated minimums based on the plan you choose.
Each year, the UK government issues specific earnings ranges employers need to take into account when they’re figuring out the correct amount of money to take out of an employee’s earnings. For the 2022-2023 tax year, this range is between £6,240 and £50,270 annually. Don’t forget to include things like commissions, bonuses, and overtime when you’re calculating your contribution.
Additionally, you need to transfer the money taken out of the employee’s pay into the pension fund by the deadline. Generally, this is the 22nd of each month if you pay by direct deposit and the 19th if you issue paychecks.
Mostly, UK employees can start withdrawing from their pensions once they’re between the ages of 60 and 65, although there are exceptions to this rule. If a staff member wants to take money out of their fund early, they must be at least 55 and they’ll have to pay taxes on it. The tax rates for this are quite high: up to 55%.
Statutory sick pay
Employees who are too ill to work are entitled to Statutory Sick Pay (SSP). You are required to pay them a minimum of £99.35 per week for up to 28 weeks. They will continue to accrue their statutory annual leave time while they’re out.
Statutory maternity leave
Mothers in the UK are afforded a much more generous amount of maternity leave than US mothers. Statutory Maternity Leave is 52 weeks; it’s broken into two 26-week periods: Ordinary Maternity Leave and Additional Maternity Leave. UK law mandates that mothers take two weeks off from work immediately following the birth of their child.
UK Employment Law also provides guidance on when maternity leave may start. Women can choose to begin their maternity leave 11 weeks before their due date at the earliest; if the baby is early, maternity leave commences the day after the mother gives birth.
While on maternity leave, women are entitled to Statutory Maternity Pay for 39 weeks. For the first six weeks, employers are required to pay 90% of the staff member’s average weekly wages; for the remaining 33 weeks, that number is set at either 90% of weekly earnings or £156.66, whichever is lower.
UK Employment Law also protects women while they’re on maternity leave. Employers are legally required to continue to allow female team members to accrue vacation time and receive scheduled pay raises. They also have the right to return to work once their leave is over.
Statutory adoption leave
Statutory Adoption Leave is very similar to Statutory Maternity Leave. Employees who adopt children are entitled to 52 weeks of paid leave, which is also broken into two 26-week periods, called Ordinary and Additional Adoption Leave. Statutory Adoption Pay is the same as Statutory Maternity Pay. Parents who are having children via a surrogate are also covered under Statutory Adoption Leave and Pay.
Statutory paternity leave
UK fathers are also entitled to leave when they become parents. When their partner gives birth (or when they adopt or have a child via a surrogate), eligible male employees are entitled to one or two weeks of paid paternity leave. And, similar to their female counterparts, men who are on paternity leave still accrue vacation time, receive scheduled pay raises, and retain the right to return to work.
Shared paternity leave
Shared Paternity Leave allows for both partners to take time off and figure out a schedule that works for them when they have a new child in the home. Parents can share up to 50 weeks of leave between them, but they also have to share the pay. The law requires employers to provide pay for 37 weeks, but you do not have to pay each employee: The government treats the parents as a single unit. Furthermore, Shared Paternity Leave must be taken in the first year of the child’s birth or adoption date, and women must agree to give up part of their Statutory Maternity Leave if they and their partner decide on this option instead.
Annual holiday leave
The UK requires employers to provide employees with 5.6 weeks of statutory holiday entitlement at minimum.
Statutory Redundancy Pay
Under UK law, employers are required to provide pay to employees who lost their jobs because they were made redundant (or “no longer needed”). Workers must have been continuously employed by the company for at least two years and the amount they get depends on their age. For instance, employees receive a week’s worth of pay for each full year they were between the ages of 22 and 41.
Employees who were fired are not eligible for Statutory Redundancy Pay.
What employee benefits are optional in the UK?
The statutory benefits covered in this guide are the minimums that must be provided by employers trying to hire employees in the UK. In addition to what’s mandatory, many companies offer their own benefit plans and even perks to attract and retain talent. Below are a few of the most common supplementary benefits.
Private health insurance and dental care plans
All UK citizens are covered by the government-funded healthcare system, the National Health Service (NHS). Recently, employers who want to stand out from the competition have either started offering or are considering providing private healthcare plans. This permits their employees to see private, rather than public, medical providers, which expands their access to healthcare. Furthermore, it reduces or removes entirely the financial burden of having to pay for private health insurance on their own, a perk that helps to attract the highest-quality employees to their business.
The UK insurance system has several supplemental health insurance options employers can provide. You can choose to offer private medical insurance (PMI), critical illness insurance (CIC), and/or regular dental insurance, to name a few. Each plan covers slightly different aspects of medical care: CIC, for instance, offers a lump sum payment if your employee has one of the 30 or 40 pre-approved conditions, such as cancer.
Additional paid time off
Providing paid time off beyond the UK’s statutory minimums is a great way to both attract and retain talent, and many employers include either extra vacation days or the ability to purchase additional days in their benefits packages.
Life assurance plans
In the UK, life assurance plans cover the policyholder for their entire life, whereas life insurance is only valid for a set term. Some supplemental benefits plans include employer-provided life assurance policies. Also known as death-in-service policies, this type of insurance has a person’s employer pay a lump sum to their beneficiaries if the individual dies while they are still an employee at the company.
How to hire employees in the UK and offer them affordable benefits in minutes—with Rippling
Running a global workforce isn't easy. It can be a challenge for global companies just to keep their benefits compliant—let alone managing offer letters, equipment, payroll, and everything else global employees and contractors need.
That's why, if you're going to hire employees, contractors, or remote workers in the UK, you need Rippling. Rippling makes it easy to onboard, manage, and pay employees and contractors around the world—in one system that helps keep you compliant with local employment laws and regulations.
We offer a native Employer of Record (EOR) service, which allows you to hire employees in the UK, enroll them in benefits, and run payroll in 90 seconds—even if you don't have a legal entity there.
Rippling’s EOR is built on top of our native payroll rails, which means that when the time comes to bring HR in-house, you can move from our EOR to Global Payroll through your own entities—in minutes.
Disclaimer: Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.