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Employment Law
Read time: 20 mins Date added: 16/06/2023
What are employment laws for? Essentially, they regulate the relationship between employers and employees in order to protect both parties. This guide has best practice guidelines on everything from recruitment to health and safety, plus handy checklists for keeping track, for employers in England, Wales and Scotland.
Recruitment
Right to work checks
You must make sure that anyone you employ has the legal right to work in the UK before their employment begins. Otherwise, you could face a fine – or even prison1. However, if you follow the correct procedures, there shouldn’t be a problem. Begin by completing these three steps:
Step 1:
Potential employees must provide original and valid documents from lists A or B in the Employers’ right to work checklists. In some instances, you may need to verify someone’s right to work using a Home Office online check. See the links below.
All your potential employees should provide documentation. If you only conduct checks when you suspect that an individual does not have the right to work in the UK, you may face a claim for race discrimination. So, make sure your recruitment and onboarding process treats everyone equally.
These government online document-checking tools can help:
- Right-to-work checker.
- Right-to-work with a share code checker.
Step 2:
You must then confirm that:
- the documents are genuine.
- your candidate is the rightful owner of the documents.
- they are allowed to do the type of work you are offering.
You should do all of this with the candidate present.
Step 3:
You must make and retain a copy of each document. However, check government advice on whether the documents you have received need to be copied in full or not. You must also keep a record of the date you made the checks. And it’s recommended that you complete and retain the Home Office checklist for each employee for your records.
Following Brexit, the rules regarding right-to-work checks have changed. You can find more information on the government’s website here.
Qualifications and skills
When recruiting or promoting, ensure the candidate has all the qualifications and registrations legally required for the job. Check for required documentation such as a practice certificate, a driving license or professional insurance. Keep copies of these certificates in the employee’s personnel records.
Providing a contract of employment
You must issue certain terms of employment in writing before employment starts. Following a spoken agreement, confirm the details in writing as soon as possible to avoid confusion or dispute.
You are recommended to do this by way of a contract of employment which contains all the terms of employment and is signed and dated by you and your employee.
A contract of employment details your company’s and your employee’s rights and obligations. However, it doesn’t cover everything, so be aware:
- Nothing in a contract can detract from an employee's statutory rights or the employer's statutory obligations.
- If the contract does not mention an employee's rights in a particular area, it doesn't mean they don't have any.
You’ll find more information about employment contracts in the section ‘Written statement of employment particulars’ on the government website at www.gov.uk.
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- The full names and addresses of the parties involved
- Start date
- Job title or description
- Pay, including holiday entitlement and sick pay
- Place of work
- Hours of employment
- Disciplinary, grievance and appeal procedures
- Pension information
- Notice periods
- Any collective agreements
- Duration of the contract if not permanent
- Any probation period
- Any training requirements
- Any expectation that the employee should work outside the UK for more than a month. And, if so, under what terms.
Terms of employment
Here are some other terms of employment that you should consider:
Part-time workers
Not everyone works the standard five-day week. Part-time workers are entitled to the same benefits, bonuses and opportunities as full-time workers, calculated on a pro-rata basis.
Fixed-term contracts
Fixed-term employees enjoy the same rights and benefits as those on permanent contracts. After four years of being continuously employed on fixed-term contracts, they may be able to claim permanent status, and after two years, they may be entitled to redundancy payments2.
Probationary periods
It’s normal practice to give new hires a probationary period that allows time to assess their suitability for the role. Its length depends on the type of work involved and how long you think it will take to assess performance.
Notice periods
During the first month of employment, there is no statutory right to notice. If the employee proves unsuitable during the first month, you can terminate the contract immediately, unless the employment contract says that you must provide notice. Equally, the employee is under no obligation to provide notice if they leave during the first month.
After one month, an employee is entitled to statutory minimum notice of dismissal (barring gross misconduct), even if they are still in their probationary period. If the contract of employment provides for a longer notice period, you will need to provide the notice set out in the contract. You can include in the employment contract that employment can be terminated on shorter notice during the probationary period (subject to the statutory minimum).
Working hours
The Working Time Regulations limit working time to an average of 48 hours per week in most jobs. There are also laws for night work, daily rest and days off per week. Employees can opt out of the limit on working hours by signed, mutual consent, but you must still meet their health and safety rights.
They also have the right to cancel their opt-out at any time with up to three months’ notice and you cannot dismiss them or treat them unfairly for refusing to opt out. Keep a list of all opted-out employees and up-to-date records of the hours worked by all your employees who have not opted out.
Paying your staff
You must pay your workforce fairly and meet your legal obligations. Make sure pay is not discriminatory and that all the required financial contributions are made on your employees’ behalf. Below are some of the issues to consider.
National Minimum Wage (NMW)
Although based on an hourly rate, the NMW applies to all eligible workers, including those on annual salaries. The government has rules about what can and cannot count as working time.
There are five rates for five categories of worker which change every April:
- The main NMW for workers aged 23 and over (called the National Living Wage).
- 21-22 years old.
- 18-20 years old.
- Under 18 but above compulsory school age.
- Apprentice (for apprentices under 19 or first-year apprentices of 19 or over).
Every business must pay at least the NMW – without exception. So, when you set up your payroll, ensure your systems recognise when minimum wage employees reach a new pay bracket, so they get the correct rate. Also, include any profit and performance-related pay that goes through the payroll.
When hiring new employees, check the current NMW rates and factor them into your payroll. Workers who are not paid the NMW can bring a claim in the employment tribunal. Employers who fail to pay the NMW may also be named under the government’s ‘naming and shaming’ scheme.
More on payroll systems and records.
Tax
Always do the following:
- Tell HM Revenue & Customs (HMRC) whenever you take on an employee, including yourself.
- Deduct Pay As You Earn (PAYE) income tax and National Insurance contributions from every employee’s earnings.
- Provide employees with a P60 tax form every year and a P45 when they leave.
- Provide HMRC with an annual return for every employee in addition to the business return and/or your personal return.
Other deductions may include the following:
- Pension schemes.
- Student loan repayments.
- Money ordered by a Court or the Child Support Agency.
- Give As You Earn (GAYE) contributions to charity.
You should also tell HMRC about any non-cash benefits you provide to staff that may be taxable. These could include company cars or health insurance.
National Insurance
The amount individuals pay depends on their employment status and what they earn. Employees are categorised as Class 1. So, employers pay Class 1A or 1B contributions on employees’ expenses or benefits along with their PAYE income tax. To find out more, contact HMRC.
Pensions
Employers must provide a workplace pension scheme the moment their first employee starts. You must automatically enrol eligible workers into the scheme and pay minimum contributions. Find out more at https://www.gov.uk/workplace-pensions-employers.
Pay statements
You must give each employee a written, itemised pay statement on or before payday. This can be a traditional hard copy or an online electronic version.
It must contain the following:
- Gross salary
- Any variable deductions like tax and National Insurance
- The employee's net pay
- The number of hours paid for (if it varies)
You must also explain any fixed deductions, such as season ticket loan repayments, either on the payslip or on a separate written statement. The latter must go out before the first payslip and should be updated annually, if appropriate.
Equal pay
Before setting the pay rate, or even starting the hiring process, you should grade each position using the following criteria:
- Level of supervision
- The skills and qualifications required
- Risk
- Initiative required
This will help you assess the value of different roles. It's important because you are legally required to pay everyone the same for doing work which is the same, similar or of equal value.
Any pay differential between men and women must be for a reason that has nothing to do with sex (for example, seniority or location). If this factor puts women at a particular disadvantage, then you must show that it is a proportionate means of achieving a legitimate aim.
Equal pay covers all aspects of pay and benefits, including the following:
- Basic pay
- Overtime rates
- Performance-related pay
- Hours of work
- Pension schemes
- Annual leave entitlement
Paid holidays
Most employees are entitled to a minimum of 5.6 weeks’ paid holiday a year. Anyone who works a five-day week should get 28 days of paid holiday a year. Part-time workers should get the same entitlement pro rata. Companies can also offer more than the statutory minimum leave.
You can decide when your employees take their holiday and how much notice they need to provide. However, you cannot refuse to let employees take leave at all.
Employees have no statutory right to paid leave on bank and public holidays. Companies can include bank holidays as part of employees’ minimum holiday entitlement, provide them in addition to it or offer time off in lieu.
Employees start to earn holiday pay as soon as they start work. If they leave, they should be paid for any accrued but unused leave. Workers will also build up holiday entitlement during maternity, paternity or adoption leave as well as during sick leave.
Sick pay
Employees get statutory sick pay (SSP) from their fourth consecutive day off if they meet the qualifying conditions. This should be paid in the same way as their regular wages with tax and National Insurance deductions. If the employee remains unwell, SSP is payable for up to 28 weeks. Employers can offer contractual sick pay on top of SSP.
Employees can self-certify their illness if they are absent for seven days or less. Beyond that, if they are sick, they need a doctor's note or certification from some other medical professional.
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- National Minimum Wage (NMW)
There are five rates which change every April. - National Insurance
The amount individuals pay depends on their employment status and what they earn. - Pay statements
Give each employee a written, itemised pay statement on or before payday. - Equal pay
Before setting the pay rate, or even starting the hiring process, you should grade each position. - Paid holidays
Most employees get 5.6 weeks’ paid holiday a year. Anyone who works a five-day week should get 28 days of holiday a year. Part-time, workers should get the same entitlement pro rata. - Sick pay
Employees get statutory sick pay from their fourth consecutive day off. Employees can self-certify their illness if they are absent for 7 days or less. Beyond that, if they are sick, they need a doctor's note. - Pensions
Employers must provide a workplace pension scheme the moment their first employee starts. Automatically enrol eligible workers into the scheme and pay minimum contributions. Removed from the checklist as moved from sick pay section above.
- National Minimum Wage (NMW)
Your ongoing responsibilities as an employer
Once you’ve recruited your staff, you are responsible for their well-being at work.
Health and safety
To keep your employees safe and comply with the Health and Safety at Work Act 1974, you must do the following:
- Carry out a thorough risk assessment of the workplace and any tasks that may present a risk.
- Draw up a Health and Safety policy (in writing if you have five or more employees).
- Provide adequate training and supervision.
- Ensure your workplace meets minimum standards of comfort and cleanliness.
- Record injuries, accidents and diseases in an accident book.
You can find more information and guidance on the Health and Safety Executive website.
Insurance
Make sure you have sufficient insurance to help you pay any compensation to employees in the event of accidents or injury in the workplace:
- Employer's Liability Insurance is essential – even for temporary or casual workers. Renew your policy each year and display the certificate prominently in the workplace. Most employers need at least £5 million cover or they could face a fine.
- Public Liability Insurance is essential if members of the public or customers come into your premises or you go to theirs to carry out work.
You may be asked to prove insurance coverage of £5 million or more when tendering for work. So, it’s worth checking what your potential clients expect before selecting a policy, though you can also increase it if required.
Disciplinaries and grievances
By law, you must set out your disciplinary and grievance rules and procedures in writing, so employees know:
- what you expect from them
- what you can ask them to do
- what their rights are
If an employee is dismissed it must be for a fair reason and you need to have followed a fair process. If you don’t follow your own procedures, a dismissal could be judged unfair.
You must also follow the ACAS (The Advisory, Conciliation and Arbitration Service) Code of Practice on Disciplinary and Grievance Procedures where the process might lead to the dismissal of an employee for misconduct or poor performance.
Legal Expenses Insurance is an optional extra on business insurance and could cover you in the event of a costly legal action, so it’s worth considering.
You must also show that any complaints are taken seriously, dealt with promptly and thoroughly investigated to ensure a fair process.
Discrimination
Neither you nor your staff may discriminate against other employees or potential employees on the following grounds:
- Gender
- Sexual orientation
- Gender reassignment
- Marital status
- Age
- Race
- Colour
- Ethnic origin
- Nationality
- Religion
- Beliefs
- Disability
- Pregnancy
- Maternity
If an employee has a disability, you may need to make reasonable adjustments so they can continue working or to support their return to work. Potential adjustments could include adapted equipment, different hours, or a new role, but it will depend on what is reasonable in the circumstances.
However, there is more to encouraging diversity than preventing unlawful discrimination. It can also enhance business success.
According to McKinsey3, a healthy balance of men and women makes companies 15% more likely to outperform their competitors. Meanwhile, those with employees from a good mix of ethnic backgrounds are 35% more likely to outperform their competitors.
Read about the Equality Act (PDF 147KB) and what it means for employers.
Harassment and bullying
Bullying and harassment are defined as any unwanted behaviour that makes someone feel intimidated or offended. Employers are responsible for preventing the bullying and harassment of their employees.
If an employee suffers harassment at work on any of the grounds mentioned above, your business may be liable – even if you knew nothing about it. A bullying and harassment policy can discourage such behaviour and help you deal with and prevent it.
Leave
Your employees are entitled to time off work over and above normal holiday and sick leave in certain circumstances.
Maternity leave
All employees qualify for 52 weeks’ statutory maternity leave, regardless of their length of service. They must tell you at least 15 weeks before their baby is due when they want to start maternity leave.
Depending on how much they earn and the length of time employed, every pregnant employee is entitled to at least one of the following:
- Statutory Maternity Pay (SMP)
- Maternity Allowance
- Contractual (company) maternity pay
- Paid time off for antenatal care
Paternity leave
The father of a child or the mother's partner can take one or two consecutive weeks’ leave within 56 days of a birth or adoption placement. Eligibility for Statutory Paternity Pay (SPP) is assessed on the same terms as SMP and paid at the same rate.
Adoption leave
Employees who are seeking to adopt a child and have worked for you for 26 weeks are usually entitled to up to 52 weeks’ statutory adoption leave (SAL). It takes effect as soon as the adoption agency certifies a match. Statutory Adoption Pay (SAP) is set at the same standard rate as SMP. Only one half of an adopting couple is entitled to SAL.
Shared parental leave
Employees may be able to share up to 50 weeks of statutory shared parental leave and 37 weeks of statutory shared parental pay with their partner in the first year after their child is born or placed with their family. They need to meet certain eligibility criteria and give up some of their maternity or adoption leave and pay.
They can take shared parental leave in blocks of time separated by periods of work or take it all in one go.
Parental leave
If an employee has worked for you for a year, they are entitled to take up to a total of 18 weeks off work, for each child, up to their 18th birthday (including adopted children).
This leave is unpaid and must be taken for the purpose of caring for a child. Only 4 weeks can be taken in each year for each child, unless you agree otherwise.
Employment rights are protected whilst employees are on any of the types of family leave mentioned above. This includes the right to return to the same job or a similar position on their return to work.
Emergency leave
All employees can take reasonable unpaid time off work for emergencies for dependants.
Other types of leave
Time off must also be allowed in certain circumstances for:
- Public duties (although you don’t have to pay staff unless stated in their contract).
- Union activities.
- Training.
- Job hunting or training when a role is at risk of redundancy.
- Jury service (although you don’t have to pay staff unless stated in their contract).
Young people
There are separate rules for workers under 18. These cover issues such as parental consultation and consent, working hours and higher standards of Health and Safety. If you are employing young workers, you should look into your obligations.
Redundancies and dismissal
It is generally fair to dismiss someone when the job (rather than the person) is no longer economically viable or necessary. You must pay redundancy to employees who have been with you for more than two years.
You could be liable for a claim of unfair dismissal if it can be shown that:
- You used redundancy as a pretext for dismissal for other reasons.
- You failed to follow the correct redundancy procedure, for instance, by failing to offer a suitable alternative role.
- You did not follow a fair procedure when selecting an employee for redundancy.
Dismissal
If you need to dismiss someone you must act fairly and reasonably and follow a fair procedure. Otherwise, you may have to pay compensation for unfair dismissal and also possibly discrimination.
Normally, anyone who is dismissed without notice (for a reason other than gross misconduct) has the same entitlement to notice pay as they’d get if they had worked their notice period. They will also be entitled to payment for any accrued but untaken holiday.
You’ll find more guidance on the government guidelines page.
Resignation
If an employee decides to resign after the first month of employment, they are required to give at least one week’s notice. The employment contract can set out a longer notice period.
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- Health and safety
To keep your employees safe and comply with the Health and Safety at Work Act 1974. You can find more information and guidance on the Health and Safety Executive website. - Insurance
Make sure you have sufficient insurance to help you pay any compensation to employees in the event of accidents or injury in the workplace. - Disciplinaries and grievances
By law, you must set out your disciplinary and grievance rules and procedures in writing. - Discrimination
Prevent discrimination in the workplace by having an up-to-date equality policy and providing regular anti-discrimination training to staff. - Harassment and bullying
Create a bullying and harassment policy. - Leave
Make sure you are compliant with maternity, paternity, adoption, parental, emergency leave and other types of leave such as jury service, union activities or training. - Young people
Be aware that there are separate rules for workers under 18. - Redundancy
You can generally dismiss someone when the job is no longer viable or necessary. You must pay redundancy to employees who have been with you for more than two years. - Dismissal
Handle dismissals fairly and reasonably. Generally, employees who are dismissed are entitled to the same pay as they’d get if they worked their notice period. - Resignation
Any employee who resigns after one month of employment is required to give at least one week’s notice.
- Health and safety
Flexible working
One of the few positives of the pandemic was the realisation that working from home provided many people with a better work/life balance.
Employers too are keen to keep talented and experienced people who want more flexibility regarding their working and home life.
Who is eligible?
Employees of 26 weeks or more can ask for flexible working, not just parents and carers. All applications must be considered in a reasonable manner.
What types of flexible working are there?
- Job sharing – where two people do one job and share the hours.
- Working from home.
- Part-time working.
- Compressed hours – working full-time hours but over fewer days.
- Flexitime – where the employee chooses when to start and finish the day within agreed limits but with core hours, for example, 10am-4pm.
- Annualised hours – where a set number of hours a year is agreed, but there is some flexibility about when the employee works.
- Staggered hours – different start and finish times from other employees.
- Phased retirement – where older workers wish to reduce their hours and work part-time.
What if you don’t want to provide flexible work?
Reasons for refusing flexible working must be set out in writing and legally justified. The rules are slightly different in Northern Ireland so check local rules.
Running a law-abiding business
As an employer, the legislation you need to follow is set out by a number of different authorities, including:
- Department for Business, Enterprise and Regulatory Reform
- HM Revenue & Customs
- Health & Safety Executive
The law changes frequently. So, if you have concerns about a particular issue, contact the relevant authority or speak to ACAS.
If you need further advice, consult a solicitor specialising in UK employment law. Many will offer a free short consultation to assess your problem and provide some initial pointers.
Resolving disputes
ACAS resolves issues between employers and employees. They offer free online training on the following topics:
- Contracts, hours and pay
- Dealing with workplace problems
- Equality, diversity and inclusion
- Health and well-being
- Leave and time off
- Managing people and performance.