Guide to Doing Business in the UK - Employment
Employees working in the UK are protected by UK statutory law, which can override the provisions of their contracts.
Some UK employment law also applies to ‘workers’, who are people who are not actually employment but who are not genuinely self-employed either.
Terms of Employment
Whilst written contracts of employment are not strictly required, businesses are required to give certain information in writing to employees. This includes details of pay, holiday entitlement, hours and place of work, date employment started, job title, pension provisions etc.
Employee Rights
There are certain mandatory UK laws that apply to all employees. Employees have various rights that will assist them in job security. It is imperative that businesses follow procedures carefully and recognise the basic rights of employees. Some considerations include:
Unfair Dismissal
If an employee is dismissed without following correct procedures, or an employee resigns due to a serious breach by the employer (known as constructive dismissal), the employee can bring a claim for Unfair Dismissal. Unfair Dismissal claims can only generally be brought if:
- The individual has been employed for more than one year. Please note that the definition of continuous employment is very broad and even short-term rolling contracts can be sufficient to give an employee the required one year of service; and
- It is within three months of the dismissal.
It does not cost an employee anything to issue the claim and an employer is often left balancing the commercial cost of defending the claim against settlement.
To avoid a successful claim, an employer will need to show that:
- The dismissal was for a fair reason e.g.: due to redundancy, capability, conduct etc; and
- It was “fair and reasonable” in the circumstances to dismiss.
Dismissal can in certain circumstances be deemed to be “unfair” automatically, for example; if the dismissal related to pregnancy. In these circumstances, there is no minimum length of service required.
Employers need to follow the principles of the ACAS Code of Practice when dismissing employees because of misconduct or incapacity. The Code, whilst not binding, will form the basis upon which an Employment Tribunal will determine whether an employer’s actions are “fair and reasonable” in dealing with dismissal. The Code provides guidance to employers on dealing with disciplinary procedures so as to ensure a fair process.
The impact of failing to deal with disciplinary matters in a fair and reasonable way can be severe. An employer can be made to:
- Reinstate the individual; and/or
- Pay compensation. Compensation is split into a basic award based on a calculation of age and length of service (up to a maximum of £11,400) and a compensatory award. In addition, if the employer has failed to follow a fair dismissal and disciplinary procedure (see above) then the compensation can be increased by up to 25%. The maximum award of compensation in most cases is £65,300.
Wrongful Dismissal
Wrongful dismissal is essentially breach of contract. Often this is due to a failure by the employer to comply with relevant notice on dismissal. Any claim for wrongful dismissal will be based on the financial loss suffered by the employee as a result of the breach.
Redundancy
Provided that the procedure is followed correctly, redundancy is a fair reason for dismissal. However, it is imperative that a clear and fair redundancy process is followed in a 3 stage process:
- There must be a clear selection process including pooling of similar employees;
- There must be a genuine reason for the redundancy process; and
- Employees should be consulted with and consideration should be given to alternative areas that they could work in.
If the intention is to dismiss 20 or more employees during any 90 day period then a set consultation process must be undertaken. Such consultation process must start at least 30 days (if between 20–99 employees affected) or 90 days (if 100+) before the actual redundancies are due to take effect. The consultation process requires employers to disclose certain information to the representatives including the method of selection and how redundancy payments will be calculated.
If an employee has more than two years of continuous service then they will be entitled to receive a statutory redundancy payment. This is calculated in the same way as an unfair dismissal basic award (see above).
Anti-Discrimination
The UK has very strict legislation in place to prevent discrimination on the grounds of disability, religion, sexual orientation, sex, race or age. The key point to note is that anti-discrimination legislation is subject to unlimited damages and applies to employees, workers and prospective employees. There is also a new Equality Act in the UK which will start to come into force in October 2010.
Other provisions
Working Time Regulations 1998
Workers are generally prohibited from working more than 48 hours per week (estimated over a 17 week rolling cycle). Employers can ask workers to “opt out” but must allow workers to be able to opt back in on notice.
Paternity and Maternity Rights
Workers have automatic rights to time off work for paternity and maternity reasons. At the moment:
- Women have the right to take up to 52 weeks’ maternity leave. If they qualify for statutory maternity pay then this will be payable for the first six weeks. This will be at 90% of their average earnings and then at a flat rate (currently £124.88) or 90% of the average weekly earnings (if lower) for the next 20 weeks;
- There are also similar adoption leave rights;
- Paternity rights are limited to a maximum of two weeks; and
- Paternity pay of up to £124.88 or 90% of the average weekly earnings (if lower) may be payable to the employee.
Holiday Entitlement
Workers are currently entitled to 5.6 weeks paid leave a year (assuming full time employment). This is calculated pro rata for part time employees. Employers are entitled to take into account any bank or public holidays.
Minimum Wage
The UK is subject to a minimum wage. This is currently £5.80 if the worker is 22 and over, £4.83 for workers between the age of 18 and 21 (inclusive) and £3.57 for 16 and 17 year olds. These rates are reviewed in October each year.
Flexible Working Hours
Any employee with children under the age of 17 has the right to make a request to be permitted to work flexibly. Requests should not be ignored and you should take advice to ensure that the correct procedures are followed.
Absence due to Sickness or Injury
Typically, employers have policies to govern sickness absence. Employers must pay a minimum weekly payment (statutory sick pay (SSP) to employees from the fourth consecutive day of absence (including weekends), subject to certain eligibility requirements. Employees are entitled to receive up to 28 weeks of SSP for any period of incapacity.
Employers sometimes supplement SSP with company sick pay for a specified period.
Employers cannot automatically recover SSP from the state. They may be able to recover some SSP from the tax authorities, depending on the level of the employer’s national insurance contributions.
Notice periods
An employee is entitled to statutory notice, which is one week during the first two years of service, rising to a week’s notice for each completed year of service, up to a maximum of 12 weeks’ notice. Employers and employees can agree longer contractual notice periods.
Liability
Common law provides that an employer is vicariously liable for the negligent acts of its employees carried out in the course of their employment. Anti-discrimination laws also provide that the employer is liable for the discriminatory acts of its employees committed during the course of their employment. A parent company is generally not liable for the acts of a subsidiary company’s employees.
Health & Safety
Employers have a duty to ensure the health, safety and welfare at work of all employees. There are various legal provisions that employers must comply with designed to safeguard health and safety.
Relocation of staff
The ability to relocate staff will depend on their contract of employment and whether the proposed relocation is reasonable in the circumstances.
TUPE
In certain asset transfers and service provision changes (“business transfers”), TUPE confers certain rights on employees who are:
- Employed by the seller immediately before the business transfer; and
- Assigned to the business, part of the business or group of resources being transferred.
Employees who would have qualified for protection under TUPE had the seller not dismissed them before the business transfer have unfair dismissal rights, where the sole or principal reason for the dismissal was either the business transfer itself or a reason connected with the transfer which was not an economic, technical or organisational reason (an “ETO reason”).
Employees of the seller automatically transfer to become employees of the buyer (without the need for consent, novation or termination). From that moment, the buyer is regarded as the legal employer of the transferring employees. The buyer therefore inherits all the rights, liabilities and obligations that the seller previously owed or enjoyed in relation to these employees.
There are various duties to inform and consult in advance of any TUPE transfer that apply to both the seller and the buyer.
Ashfords LLP is regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.
