UK Employee Benefits

Enquire Now

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.

Social Security in UK

Both employers and employees must contribute to National Insurance. Employers have to deduct National Insurance Contributions from their employee’s wages each month, as well as contribute themselves with their own payments.

NIC payments depend on how much the employee earns and must be made monthly or quarterly. Late or incorrect payments may result in interest payments.

The social security payments also depend on the employee’s class (see Statutory Costs below). Below are the payments for both employee and employer for employees under Class A:

Employer’s Social Security Contributions 

  • £520 - £737 per month - 0%
  • £737.01 – £4,189 per month - 13.8%
  • Over £4,189 per month - 13.8%

Employee’s Social Security Contributions

  • £520 - £797 per month - 0%
  • £797.01 - £4,189 per month - 12%
  • Over £4,189 per month - 2% on the remaining amount

Statutory Cost in UK

Statutory Costs in the UK include meeting the standard employee wages, and income, social and corporate taxes.

Employers must meet the minimum wage for their sectors and industries, and ensure that the necessary payments from their wages to the local authorities are made on time, which include:

  • Income Tax – income tax is to be withheld from the employee every month and paid by the employer monthly to the local tax authorities.
  • Social security – social security payments are to be made by both the employer and the employee monthly, which contributes to pension schemes and health insurance.
  • Corporate Tax – corporate taxation on income and profits are mandatory for all businesses in the UK.

Statutory costs also depends on the employee’s tax class/category, which can be split, like so:

  1. A - All employees apart from those in groups B, C, J, H and M
  2. B - Married women and widows entitled to pay reduced NI
  3. C - Employees over state pension age
  4. H - Apprentices under 25
  5. J - Employees who can defer NI contributions as they pay them in another job
  6. M - Employees under 21

What Benefits Are Guaranteed in the UK?

Employee benefits that are guaranteed (after probation is passed) in the UK include:

  • Annual Leave
  • Pension
  • Sick Leave
  • Maternity Leave
  • Paternity Leave
  • Parental Leave
  • Unemployment

What Restrictions Exist for Benefits and Compensation in the UK?

  • In the case of employment agreements that include collective bargaining, employers need to meet conditions and entitlements of the collective agreement, as well as UK employment law.
  • Unemployment Benefits can only be received for up to 6 months.
  • Statutory sick leave is restricted to 28 days annually, and Statutory Sick Pay can only be received if certain conditions are met (see above).

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

Work with Bradford Jacobs

Employment law in the UK is based on a mix of legislation – employment law, the labor code, collective agreements, trade unions and work councils’ agreements – which only adds to the hurdles of business expansion and establishment.

Companies planning to expand into Britain, either through establishing a subsidiary, finding local staff, or migrating staff must ensure understanding and compliance with various complex laws and regulations.

Employment compensation, benefits, social security contributions, and health insurance must be attended to swiftly and efficiently to ensure a smooth transition of your new venture into the UK. Get ahead of these issues by working with Bradford Jacobs’ Employer of Record (EOR) services.

Contact us today to see how we can benefit your plans in the UK!