Employee Benefits in the UK

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What are the Employee Benefits in the UK?

Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in the UK might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labor contracts for employees in Britain including local benefits. When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In the UK, benefits are guaranteed by national legislation as well as collective agreements with trade unions or workers’ councils.

Our guide will explain what benefits and employee compensation are guaranteed, and what can be modified, for any employer who wishes to expand their business into the world leader of innovation.

What UK Compensation Laws Exist?

In the UK, compensation laws are set by national legislation, but the types of compensation can vary according to the sector the employees are in, regulations of collective agreements, and the internal regulations of the company. For example, there is no 13th month pay in the UK, but employee bonuses can be given at the discretion of the employer or can be negotiated as performance clauses in the employment contract. There are, however, benefits and/or compensation that are guaranteed by national legislation:

Minimum wage: All employees in the UK are entitled to receive at least the statutory minimum wage in the UK. This wage is split into two types, which varies by age:

  • National Living Wage – for employees over the age of 23
  • National Minimum Wage – for employees that are under 23 but must be at least over the school-leaving age to receive it.

Social Security Contributions: Both employers and employees must contribute to National Insurance, which depend on the employee’s salary and category.

Termination and Severance: Employee termination must be done within a statutory notice period, which depends on their length of service:

  • At least one week’s notice – employed between one month and 2 years
  • One week’s notice for each year – employed between 2 and 12 years
  • 12 weeks’ notice – employed for 12 years or more

This also includes a severance payment, known as a ‘notice pay’, which must include all pending overtime payments, bonuses, and payment for annual leave not taken.

Work Hours and Breaks: All employees must be paid for the hours that work. There is no statutory payment for overtime work, but payment should not fall under the National Minimum Wage.

Sick Leave and Payments: All employees are entitled to sick leave, and employees are entitled to a statutory sick pay if they have been unavailable to work for 4 or more consecutive days. The weekly rate for this pay is £96.35 and can be paid for up to 28 weeks.

Holiday and Vacation Leave: Employees are entitled to a minimum of 28 days of paid annual leave per year. An employer can also choose to include bank holidays as part of the employee’s annual statutory leave.

Maternity Leave: Pregnant employees are entitled to 52 weeks of maternity leave, which is split into two types of leave:

  • Ordinary Maternity Leave – the first 26 weeks of leave
  • Additional Maternity Leave – the last 26 weeks of leave

The earliest that leave can be taken is 11 weeks before the expected week of childbirth. Employees may not take all 52 weeks of their maternity entitlement, but they must take two weeks’ leave once the baby is born. Pregnant employees are also entitled to a statutory maternity pay (SMP) if they have worked for the employer for at least 26 weeks and meet minimum earning requirements. Employees may claim this allowance as soon as they have been pregnant for 26 weeks, and payments can start 11 weeks before the child is due.

Maternity Pay is currently set at 90% of the employee’s average earnings for the first six weeks of maternity leave, or £151.97 per week or 90% of the employee’s average weekly earnings for the next 33 weeks.

Paternity Leave: Eligible employees can take 2 consecutive weeks of paternity leave within a period of 56 days, which begins with the date of the child’s birth in blocks of a week at a time. If the employee is already on parental leave, they are not entitled to paternity leave. The qualifying week for this leave is the 15th week before the child is due. The employee’s eligibility includes 26 weeks of continuous service, be expectant of the responsibility for the upbringing of a child, and be the biological father of the child, or married to/the civil partner of the child’s mother. The statutory weekly rate of Paternity Pay is £151.97 or 90% of the employee’s average weekly earnings.

Parental Leave: Employees are entitled to 18 weeks of unpaid parental leave for each child or adopted child, until they reach 18 years of age. Each parent is entitled to 4 weeks of parental leave, which should be taken in a period of one week’s duration unless agreed between the employer and employee.

Unemployment: Individuals who are looking for work are entitled to a Jobseeker’s Allowance, which is a weekly allowance, with the amount depending on a person’s age.

  • 25 and over – up to £74.70 per week
  • Up to 24 – up to £59.20 per week

This allowance will only be met if the individual has previously paid to National Insurance and agree to take the necessary steps to look for work whilst receiving this allowance.