Post-Brexit, employment and labor laws in the UK are quite different from the European Union’s regulations. Whether you’re based in the EU, the United States, Canada, or a different nation, don’t assume that familiarity with your own country’s employment laws will make you an expert on those in the United Kingdom. The penalties for violating the law can be harsh: Depending on the offense, you could be fined anywhere from hundreds to thousands of GBP, and you might even face jail time.
To ensure you remain compliant with UK labor laws, it’s best to proactively inform yourself before you start hiring employees in the United Kingdom. This guide will cover many basics you should be aware of, from statutory benefits to the National Living Wage and much more.
1. At-will employment doesn’t exist
UK labor laws prohibit at-will employment; in other words, you cannot dismiss employees in the United Kingdom for any reason without notice. An employee you decide to terminate is entitled to written notice. The only exception to this rule is if the team member has committed an act of gross misconduct, which includes theft and violence. If this is the case, they can be dismissed immediately without any notice.
Keep in mind that to remain compliant with UK employment laws, you must have a good, justifiable reason for dismissing the employee, and you must follow your company’s official procedure for terminating team members.
If you’re not sure whether your reason for wanting to dismiss an employee is fair or not, it’s best to seek legal advice before moving forward.
2. There are three UK employment classifications
You’re likely familiar with—or at least have heard of—the two common employment classifications most nations’ labor laws cover: employees and independent contractors. In the UK, however, there’s a third employment classification: the worker. Simply put, the “worker” isn’t quite an employee, but they’re not an independent contractor either. They fall somewhere in the middle.
A person might be classified as a worker if:
- They’re not self-employed and their employer isn’t considered a client. Instead, they have a formal employment contract with the company.
- They don’t work for their employer full time, but they’re still on the payroll and things like National Insurance are deducted from their paychecks.
- They can’t subcontract their tasks to someone else, and their work is supervised by one of the managers at your company.
This list is by no means exhaustive; for more information on how to classify employees, independent contractors, and workers in the United Kingdom, check out our guide on employee classification in the UK.
3. Misclassifying employees could cost you millions of dollars
In 2021, Uber made the grievous error of misclassifying its employees as independent contractors, and the UK Supreme Court didn’t hold back when it came to penalizing the company. Uber found itself fined nearly £1 billion for the offense.
Another example: In 2022, a case was opened by the UK and other countries against Nike for misclassifying its employees. The company is facing a fine of over £50,000,000 in the United Kingdom.
These examples aren't meant to scare you. Rather, they are intended to highlight how seriously His Majesty’s Revenue and Customs (HMRC) takes employee misclassification.
Should you misclassify your employees or workers as independent contractors, you’ll be required to immediately give those individuals the benefits they should have been receiving for the entire time they’ve been working for you. You’ll also be subject to hefty fines. And if HMRC determines you’ve misclassified your employee wilfully and knowingly, you could also face prison time.
To sum it up, misclassifying your employees, workers, and independent contractors can land you in hot water with harsh misclassification penalties.
Our FREE Worker Classification Analyzer lets you know if you are risking millions in finesSee Rippling
4. The UK has strong anti-discrimination protections
The Equality Act 2010 ensures UK employees are protected against discrimination on many fronts, including when they’re applying for a job and in the workplace itself once they’ve been hired.
Under the Equality Act 2010, employers are not permitted to discriminate against employees due to their:
- Gender reassignment
- Sexual orientation
- Marriage or civil partnership
Employees in the UK are protected against both direct discrimination and indirect discrimination. The former is probably what comes to mind when you think of “discrimination”; it refers to treating someone less favorably than others due to a particular characteristic, such as their race or their age. The latter occurs when there’s a policy in place that, while it’s the same for everyone, results in a particular group of people being disadvantaged.
Additionally, employees who report discrimination in the workplace are legally protected from retaliation in the form of discrimination, and the law safeguards workers against being bullied, belittled, or otherwise harassed at work.
5. There’s a National Living Wage and a National Minimum Wage
The UK has two categories of statutory minimum wage you must pay your employees: the National Living Wage and the National Minimum Wage. Who gets what depends on their age. Employees ages 23 and up receive the National Living Wage, which is higher than the National Minimum Wage. Employees who are 22 or younger receive the lower National Minimum Wage.
6. UK employees have the right to join a trade union
Employees in the UK are permitted to join one or more trade unions, be part of a trade union their employer doesn’t negotiate with, end their union membership, and make their own choice about whether they want to join a union or not. You cannot treat them differently based on their decision; nor can you dismiss them because they’ve joined (or left) a trade union. You are also not permitted to offer them any form of enticement to leave the union.
7. If you fail to offer benefits, you’ll be hit with fines, penalties, and legal consequences
Employees in the UK are entitled to a variety of statutory benefits, including workplace pensions, holiday entitlements, maternity leave, paternity leave, bank holidays, and redundancy pay (for eligible employees). Employers must deduct National Insurance–a tax that helps pay for things like State Pensions and other public programs–from each employee’s paycheck and contribute towards it.
8. Employers aren’t required to pay severance
In contrast to countries like the US, employers in the UK aren’t required to pay severance when an employee is dismissed from the company for a reason that isn’t their fault (i.e., for reasons other than gross misconduct). However, with that being said, if you do offer severance, it will demonstrate to potential candidates that you’ll provide an additional safety net should they find themselves without employment, thus giving you a competitive advantage.
9. Everything needs to be spelled out in the employment contract
UK labor laws are big on written consent; almost all parts of the employment relationship must be spelled out in the employment contract. This includes everything from reasons the employee can be dismissed to whether they will work overtime and, under the Employment Rights Act 1996, whether they consent to deductions being taken out of their paychecks.
Simply put, if it’s an aspect of the employment relationship, put it in writing, have the employee read it over, and make sure they are informed and consent to your company’s policies before they sign the contract of employment. Don’t worry about going overboard: in the UK, it’s better to be safe than sorry.
10. You need to safeguard employees’ personal information
Despite Brexit, the UK’s Data Protection Act 2018, which was adopted to complement the EU’s general data protection regulation (GDPR), is still in effect. It states that employers must take proper precautions to safeguard all employee information, particularly that of a sensitive nature, such as an employee’s race, political views, biometrics, and sexual orientation.
As an employer, under the Data Protection Act 2018, you are required to, among other things, ensure you:
- Use employee information in a manner that is lawful and transparent.
- Don’t keep information for longer than is necessary.
- Keep accurate, up-to-date records.
- Take the proper security measures, including preventing unauthorized access to databases.
- Be specific and explicit about what you’re using employee information for.
- Only ask for information that’s necessary and relevant.
Frequently asked questions about UK employment laws
What is the National Living Wage in the UK? What about the National Minimum Wage?
In the United Kingdom, the hourly wage you are legally required to pay employees depends on two factors: their age and whether they’re an apprentice*.
The UK government calls the rate for employees ages 23 and up the National Living Wage. The wages for all other employees are called the National Minimum Wage. The rates for each age group—as well as apprentices—are detailed in the table below.
National minimum wage (per hour; GBP)
18 and under
23 and over
These wages are accurate as of April 2023. It’s important to keep in mind, however, that these numbers change every year on April 1.
*The UK government has laws dependent on several factors when it comes to the rate employers are required to pay apprentices. If you have an apprentice who’s either under the age of 19 or 19 and up but in their first year of apprenticeship, you must pay them the apprentice rate of £5.28 per hour. If they are over 19 and no longer in their first year of apprenticeship, they receive either the National Minimum Wage for their age group or the National Living Wage if they are 23 or over.
What are the overtime laws in the UK?
In the United Kingdom, whether or not an employee must work overtime depends entirely on the terms of their employment contract. UK labor laws leave many of the decisions about overtime up to the employer, including whether or not team members are paid for the extra hours they work.
However, employment laws are strict about consent and discrimination. Employees cannot be forced to work more than the standard 48-hour work week unless they agree to it and the extra hours are laid out in their employment contract. Additionally, employers cannot discriminate against employees, defined here as permitting some team members to work overtime while barring others from doing so.
Head spinning? Don’t worry: Rippling EOR will automatically track hours and give your UK employees the correct overtime rate.
What are the required benefits in the UK?
In the United Kingdom, full-time employees have the statutory right to the following benefits, including paid leave and holiday entitlements:
- Workplace pension (also known as “occupational,” “company,” “works,” or “work-based” pensions)
- Sick pay*
- Annual holiday leave**
- Eight bank holidays
- Redundancy pay***
- Maternity leave
- Paternity leave
- Adoption leave
- Shared paternity leave
You’ll note that health insurance isn’t on the list of statutory benefits. That’s because all UK citizens are covered by a national health insurance system known as the National Health Service (NHS). You can, however, offer your employees private healthcare plans, including dental care, in addition to their NHS coverage.
Other common optional benefits in the UK include life assurance plans and additional paid time off.
For more information, check out our complete guide to employee benefits in the UK.
*As of May 2023, employees who are unable to work due to illness are entitled to Statutory Sick Pay. Employers are required to pay employees £109.40 every week for 28 weeks. You are, of course, permitted to pay your team members more than this if it’s in their employment contract, but you cannot pay them less.
**In the United Kingdom, employees who are classified as workers are entitled to 5.6 weeks of annual holiday leave–sometimes referred to as “statutory leave entitlement” or just “annual leave”--each year. This includes the eight bank holidays the UK celebrates each year.
***Redundancy pay is given to employees who lose their jobs because they are no longer needed. You must pay team members statutory redundancy pay if they’ve been continuously working for your company for two years or more. There are, however, a few exceptions to this rule. You don’t have to give redundancy pay to employees who:
- Were fired due to misconduct
- Received an offer from the company to stay on
- Were offered suitable alternative work—defined as a job that’s similar to the one they had—that they turned down without giving you a good reason for rejecting the job
How do I terminate employees in the UK?
When you’re focused on hiring employees, you’re (hopefully) not also planning on firing them anytime soon. However, it’s crucial to be aware of UK labor laws surrounding unfair dismissal. If you violate termination laws, you’ll be required to pay the team member a sum dictated by the employment appeal tribunal they reached out to.
The UK government doesn’t recognize at-will employment; in other words, you can’t dismiss an employee without a reason.
The following are just some of the reasons you’re legally allowed to dismiss employees in the United Kingdom:
- The team member is unable to do their job properly, and the lack of competence is putting a burden on your other employees.
- The employee has taken an excessive number of sick days and you’ve exhausted all the options you have to support them, including giving them an adequate amount of time to recover or altering their job duties if the work itself is contributing to their illness.
- The employee is guilty of gross misconduct, which includes many offenses, such as being violent towards another employee, committing fraud, discriminating against another employee, or stealing from the business.
- The team member is sent to prison.
In addition to understanding what constitutes fair dismissal in the eyes of the UK government, it’s crucial to be aware of what counts as unfair dismissal. Below is a brief list of some of the situations in which the termination is considered unfair:
- The employee joined a trade union.
- The employee is out on maternity, paternity, or adoption leave.
- The employee requested time off for maternity, paternity, or adoption leave or jury duty.
- The employee engaged in whistleblowing.
It should be noted that none of this applies during the probationary period. If things don’t work out or the employee simply isn’t the right fit for the job, that’s considered a justifiable reason for dismissal.
For a deep dive into the dismissal requirements—including information on statutory redundancy pay and unfair dismissal claims—in the UK, read our complete guide to terminating employees in the United Kingdom.
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Rippling and its affiliates do not provide tax, accounting or legal 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.