Whether you are a UK startup looking to employ your first employees, or a US company looking to recruit someone based in the UK, you should be aware of the following points. Be sure to also check out our Offer Letter and Employment Agreement Package on Cooley GO Docs.
1. How should you ‘engage’ your employee?
There is no specific requirement for how you should engage an employee in the UK. However, you should confirm the key terms of their engagement in a written document within two months from the date that they start working for you. The key terms would cover the job title, wage, hours of work, holiday entitlement, any payment for times when the employee is off work due to ill health, any pension scheme that is in place for the employee and the notice period for terminating the employment.
In practice, it is very common to engage employees under contracts of employment as these can include, as well as the required terms and conditions of employment, additional protections for the employer such as express confidentiality obligations, assignment of intellectual property provisions (very important for intellectual property based companies), and post-termination restrictions to prevent the employee from leaving and taking other key employees or clients/ suppliers with them.
2. Working time
Working time in the UK is governed by the Working Time Directive (“WTD”). The WTD was introduced with the principal aim of protecting the health and safety of employees at work. Under it, employees are entitled to:
- a minimum daily rest period of 11 consecutive hours in every 24-hour period;
- a rest break after six hours of work;
- a weekly rest period of at least 24 hours in every seven-day period; and
- at least four weeks’ paid annual leave.
In addition, the WTD imposes a maximum 48-hour average working week, calculated over a rolling four-month period (although often, employees in the UK opt out of this restriction and work more than the average weekly limit).
3. Immigration constraints
You must ensure that the individuals you employ have permission to work in the UK to avoid any sanctions being imposed on you. The following is a list of categories of persons that do not need permission to work in the UK:
- British citizens;
- a person with the right to abode (a British Citizen and citizen of certain commonwealth countries that are free from immigration restraints, will not need a visa to enter the UK and are freely able to work in the UK);
- persons with indefinite leave to remain (those who do not have the right to abode but who have been granted permission to indefinitely stay in the UK and are freely able to work in the UK);
- nationals of the European Economic Area;
- Swiss citizens; and
- Spouses of British citizens, Swiss nationals and EEA nationals (provided there are no restrictions on their residency permit).
Persons falling outside of these categories will need to apply for a visa under the government’s points based system. The system consists of five tiers with tiers 1,2 and 5 relating specifically to employment in the UK with each tier having a different points requirement. If you are looking to hire someone falling within tiers 2 and 5, you will have to sponsor the employee and apply for a sponsor license from the UK border agency.
If you employ at least one person in the UK earning in excess of £10,000.00, you will be subject to the auto-enrolment process whereby you, as employer, must enrol your employees in a workplace pension scheme. This is part of a government initiative to encourage people to build savings. The date that you have to start the auto-enrolment process depends on the date that you first have to pay income tax deductions from your employee’s wages to HMRC, known as the ‘PAYE Scheme’.
5. National Minimum Wage
In the UK, employees are entitled to receive the national minimum wage. The amount that they are entitled to receive depends on their age at the time of employment. For employees aged 21 to 24, the national minimum wage is currently £7.05 per hour and will rise to £7.38 per hour in April 2018. For employees aged 25 and above, the national minimum wage is currently £7.50 and will rise to £7.83 in April 2018.