Mandatory employee benefits include the National Minimum Wage, the capped 48-hour working week and entitlement to Statutory Redundancy Pay if they have been with the company for more than two years. The National Insurance Contribution provides the statutory benefit of UK health insurance.
Mandatory employee benefits include the National Minimum Wage, the capped 48-hour working week and redundancy pay after two years’ service. National Insurance contributions fund the statutory benefit of UK health insurance.
Employers may offer extra incentives of medical and life insurance or ‘perks’, such as company cars, gym membership, flexible working hours or childcare vouchers, but these can have implications for tax and NIC.
Managing benefits and compensation comprises a key element of Human Resources management. Bradford Jacobs’ comprehensive understanding of these sectors of UK employment law ensures all requirements will be met in a trouble-free process.
UK employer statutory costs include such as income tax, National Insurance and pension contributions, deductions to repay an employee’s student loan for example.
Employees have a category letter which determines how much they and their employer contribute.
Category Letter Employee Group
A All employees apart from those in groups B, C, J, H and M
B Married women and widows entitled to pay reduced NI
C Employees over state pension age
H Apprentices under 25
J Employees who can defer NI contributions as they pay them in another job
M Employees under 21
Employer National Insurance Rates (no NIC contributions are made for earnings less than £732 pm)
Category Letter £732.01 to £4,167pm Over £4,167pm
A 13.8% 13.8%
B 13.8% 13.8%
C 13.8% 13.8%
H 0% 13.8%
J 13.8% 13.8%
M 0% 13.8%
Employee NI contributions deducted from their pay vary between 2%, 5.88%, 12% depending on their earnings and category letter.
What benefits are guaranteed in the UK?
International companies expanding into the United Kingdom must be aware of key elements of the benefits and compensation regulations. Using an experienced global recruitment Professional Employer Organization and Recruitment Process Organization (RPO), such as Bradford Jacobs, is good advice to ensure remaining compliant with the regulations.
The National Minimum Wage (or National Living Wage) depends on the employee’s age so it is vital to correctly calculate a fair and legal wage for each member of staff. The UK also has a mandated 48-hour working week (averaged over 17 weeks) and other benefits come within the working week regulations, such as a 20-minute break after six hours work. However, employers are entitled to set the actual hours, e.g. 8am to 5pm, 8.30am-4.30pm or the traditional ‘nine to five’ as a guide.
The employer’s mandatory National Insurance contributions go towards UK health insurance for employees, who are also entitled to a statutory redundancy benefits after they have worked for a minimum of two years.
What restrictions exist on benefits and compensation in the UK?
Restrictions on unemployment benefit in the UK are based on age. The ‘Job Seeker’s Allowance’ (as of May 2020) is £58.90 per week for under-24s, £74 for over-25s and £116.80 for couples aged over 18. The JSA lasts for 182 days.
Statutory paid leave in the UK is restricted to 28 days (5.6 weeks) for full-time workers, adjusted accordingly for part-time workers. Most employees work a five-day week, but even those working six days are restricted to 28 days maximum.
Health Insurance and other benefits in the UK
Employees making social security contributions are entitled to access the National Health Service. Some employers might offer additional health insurance schemes and surveys suggest employees value contributory pension schemes and health cover most highly among benefits.
Other extra benefits employers might include to attract staff, include: free or discounted meals and drinks • dental care plans • subsidized gym membership and wellness programs • company car • free or subsidized travel • childcare vouchers • flexible working hours
Bonuses in the UK
Employers decide what bonuses to pay, or whether to pay any at all. Employers still have tax, National Insurance and reporting obligations to HMRC when paying bonuses.
For example, bonuses count as earnings so:
- Add them to your employees’ other earnings
- Deduct Pay As You Earn (PAYE) and Class 1 National Insurance through payroll
Employers providing bonuses, benefits and expenses to employees must inform HMRC and may be need to pay tax and NIC on them. For example:
- Company cars
- Health insurance
- Travel and entertainment
Using the payroll services of a company such as Bradford Jacobs to deal with the implications of bonuses, expenses and benefits will remove a significant burden from a company’s workload.
Work with Bradford Jacobs
Any company planning expansion into the UK, either through a subsidiary or by migrating staff, faces a mass of complex laws, regulations and strict compliance issues. Compensation and benefits, statutory costs, bonuses and expenses – these issues cannot be overlooked for the smooth transition of your operation.