Employment, Immigration and Pensions
Part 3 - setting up a business in the UK
Introduction to immigration
The UK has a strict system of immigration controls for those who are not UK nationals.
Any non-UK national who wishes to set up a business or work in the UK will normally need to apply for and obtain prior entry clearance before travelling to the UK.
If an overseas company wishes to send key staff who are not UK nationals to work in the UK, approval will need to be obtained from the relevant authorities.
Our specialist business immigration team can advise on the best route to meet your business requirements. Routes to consider may include:
The Skilled worker route is the primary work route in the UK points-based immigration system. This is a great route for a business which has an established presence in the UK with at least one UK based employee. The business can then sponsor overseas nationals, including senior managers and business leaders, to fill vacancies in the UK business.
The Scale-up visa allows highly talented individuals from the overseas market to come work in the UK with a fast-growing business.
The UK expansion worker visa is a good visa route if you are planning to open a UK entity of your existing overseas business. It can be used to bring in up to 5 senior executives to help establish the UK arm of the business, and for the expansion to be carried out by trusted executives from the overseas business.
The Innovator visa route is an ideal visa route for entrepreneurs who wish to establish a business in the UK. The business you intend to set up must be innovative, commercially viable and scalable.
Employment law in England and Wales
The following is a brief summary of the most important rights and protections of employees working in England & Wales.
The right to receive a written statement of their terms of employment within two months of starting work:
As an employer, you may be liable to pay compensation of between two and four weeks’ pay if employees are not given such a statement and seek redress in an Employment Tribunal. We recommend that appropriate contracts of employment are provided to all employees.
Most employees cannot be required to work more than an average of 48 hours a week unless they expressly agree otherwise with their employer.
Employees are also entitled to 5.6 weeks’ paid annual leave (28 days for a full-time employee). This can include public and bank holidays, of which there are eight a year in England.
Employees have the right to paid time off for ante-natal or adoption appointments and for maternity, adoption, paternity and parental leave. In most cases the amount that they are entitled to be paid is specified by legislation and increases each year. In certain circumstances, they also have the right to unpaid time off in order to care for dependents.
Although there is no limit on how long an employee may be sick for whilst in employment, an employee may receive a minimum payment of Statutory Sick Pay (SSP) if they are unable to work due to sickness (subject to certain eligibility criteria). It is payable by an employer after 3 full days of absence for up to 28 weeks. The current rate is£109.40 per week (from 6 April 2023) and is reviewed annually. Many employers will enhance this payment, usually for a limited period.
After one month’s service, employees are entitled to minimum periods of notice from their employer of the termination of their employment. The minimum statutory right is one week’s notice, rising by one week for each year of service up to a maximum of 12 weeks. Notice periods may be extended under a contract of employment.
There is no concept of ‘at will’ employment in UK law. Once employees have been employed for a certain period they may only be dismissed for one of the prescribed fair reasons, including redundancy (lay off), incapability and misconduct. In addition, employers must follow a fair procedure when dismissing an employee. Failure to follow a fair procedure, or terminating employment for a reason other than one of the reasons permitted by law, could lead to a claim for unfair dismissal. Most unfair dismissal claims are limited to one year’s pay or a financial cap which increases each year. However, for certain dismissals, such as those in connection with pregnancy or for ‘whistleblowing’, compensation may be unlimited.
Employees have the right not to be discriminated against because of age, disability, gender reassignment, marriage or civil partnership, pregnancy or maternity, race, religion or belief, sex or sexual orientation. Compensation for breach of the discrimination laws is not subject to any cap.
All UK employers are required to automatically enrol eligible workers in a pension scheme and contribute to it. The mandatory contributions are, however, substantially lower than the contributions in some other jurisdictions.
Employees’ rights to privacy in the workplace are protected in the UK and throughout the EU. Employers generally need employees’ consent to process any personal data. In addition, special rules apply to transferring data outside of the UK to a country that is not in the European Economic Area. This includes accessing data contained on a global HR.
It is common for employment contracts (sometimes called service agreements) to also include confidentiality provisions and, for senior or key employees to have explicit post- termination restrictions in their future employment.
Employees do not have the statutory right to benefits such as private medical insurance, permanent health insurance (long-term disability insurance) or dental insurance, although private medical insurance is commonly offered to ‘white collar’ employees. Other benefits may include a car allowance and/or a season ticket loan for travel.
The UK’s Working Time Regulations generally allow workers the following:
- A daily rest period of 11 hours’ uninterrupted rest per day
- A weekly rest period of 24 hours’ uninterrupted rest per week (or, at the employer’s choice, 48 hours’ per fortnight)
- A rest break of 20 minutes when a day’s working time is more than six hours
Young workers (those over compulsory school age but under 18) have greater entitlement to rest breaks than adult workers:
- A daily rest period of 12 consecutive hours
- A weekly rest period of 48 hours
- A rest break of 30 minutes where daily working time is more than four and a half hours
The current National Minimum Wage (NMW) also known as the living wage in the UK is updated annually in April. At the time of writing, the current minimum hourly rates, are:
From 7 April 2024
- Age 21+ - £11.44
- Age 18-20 - £8.60
- Age 16-17 - £6.48
Pensions
All UK employers have a legal duty to automatically enroll what are referred to as their “eligible jobholders” into a pension scheme which meets certain minimum standards.
An “eligible jobholder” is a worker who:
- is aged between 22 and the UK State Pension Age
- earns at least £10,000 a year (£833 per month or £192 per week)
- normally works in the UK (this includes people who are based in the UK but travel abroad for work)
UK employers must assess a worker at the start of employment to determine whether they are an “eligible jobholder” and need to be automatically enrolled into a pension scheme.
Employers can choose to utilise postponement which allows them to delay automatically enrolling an “eligible jobholder” for up to three months after the start of employment.
Once automatically enrolled into a pension scheme, there is also a legal duty to make pension contributions to the scheme.
The current statutory minimum pension contribution is 8% of “qualifying earnings”, which are earnings above £6,240 up to and including £50,270 per year. An employer must contribute at least 3% of “qualifying earnings” and, if so, an employee or worker contributes 5% of “qualifying earnings”.
In addition to other statutory requirements, an employer is required to issue statutory communications to employees or workers about how automatic enrolment affects them. An employer must also submit a declaration of compliance to the Pensions Regulator within a certain timescale.
An employer must also go through a process every three years which is referred to as automatic re-enrolment where the employer automatically re-enrolls any “eligible jobholder” who have opted-out of a pension scheme in the preceding three years.
Whilst there is a legal duty to automatically enrol “eligible jobholders”, many UK employers choose to provide more generous pensions arrangements and have done so for many years before the pensions automatic enrolment legal duty was first introduced in 2012.
For example, some UK employers provide pension benefits which are known as defined benefits that are based on the amount of salary and length of employment. These benefits are difficult and expense to manage.
There are complex tax rules which relate to pension benefits as well. Some of these tax rules can have an impact on high earners.
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Partner & Head of Intellectual Property
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Employment Law in England and Wales
The following is a brief summary of the most important rights and protections of employees working in England & Wales.
The right to receive a written statement of their terms of employment within two months of starting work
As an employer, you may be liable to pay compensation of between two and four weeks’ pay if employees are not given such a statement and seek redress in an Employment Tribunal. We recommend that appropriate contracts of employment are provided to all employees.
Working hours and annual leave
Most employees cannot be required to work more than an average of 48 hours a week unless they expressly agree otherwise with their employer.
Employees are also entitled to 5.6 weeks’ paid annual leave (28 days for a full-time employee). This can include public and bank holidays, of which there are eight a year in England.
Time off rights relating to family
Employees have the right to paid time off for ante-natal or adoption appointments and for maternity, adoption, paternity and parental leave. In most cases the amount that they are entitled to be paid is specified by legislation and increases each year. In certain circumstances, they also have the right to unpaid time off in order to care for dependents.
Sick pay during any sick leave
Although there is no limit on how long an employee may be sick for whilst in employment, an employee may receive a minimum payment of Statutory Sick Pay (SSP) if they are unable to work due to sickness (subject to certain eligibility criteria). It is payable by an employer after 3 full days of absence for up to 28 weeks. The current rate is£109.40 per week (from 6 April 2023) and is reviewed annually. Many employers will enhance this payment, usually for a limited period.
Entitlement to notice
After one month’s service, employees are entitled to minimum periods of notice from their employer of the termination of their employment. The minimum statutory right is one week’s notice, rising by one week for each year of service up to a maximum of 12 weeks. Notice periods may be extended under a contract of employment.
Termination of employment
There is no concept of ‘at will’ employment in UK law. Once employees have been employed for a certain period they may only be dismissed for one of the prescribed fair reasons, including redundancy (lay off), incapability and misconduct. In addition, employers must follow a fair procedure when dismissing an employee. Failure to follow a fair procedure, or terminating employment for a reason other than one of the reasons permitted by law, could lead to a claim for unfair dismissal. Most unfair dismissal claims are limited to one year’s pay or a financial cap which increases each year. However, for certain dismissals, such as those in connection with pregnancy or for ‘whistleblowing’, compensation may be unlimited.
Protection from discrimination
Employees have the right not to be discriminated against because of age, disability, gender reassignment, marriage or civil partnership, pregnancy or maternity, race, religion or belief, sex or sexual orientation. Compensation for breach of the discrimination laws is not subject to any cap.
Pension provision
All UK employers are required to automatically enrol eligible workers in a pension scheme and contribute to it. The mandatory contributions are, however, substantially lower than the contributions in some other jurisdictions. (See also page 12).
Data privacy
Employees’ rights to privacy in the workplace are protected in the UK and throughout the EU. Employers generally need employees’ consent to process any personal data. In addition, special rules apply to transferring data outside of the UK to a country that is not in the European Economic Area. This includes accessing data contained on a global HR.
Statement of terms of employment
It is common for employment contracts (sometimes called service agreements) to also include confidentiality provisions and, for senior or key employees to have explicit post- termination restrictions in their future employment.
Employees do not have the statutory right to benefits such as private medical insurance, permanent health insurance (long-term disability insurance) or dental insurance, although private medical insurance is commonly offered to ‘white collar’ employees. Other benefits may include a car allowance and/or a season ticket loan for travel.
Entitlement to rest breaks
- The UK’s Working Time Regulations generally allow workers the following:
- A daily rest period of 11 hours’ uninterrupted rest per day
- A weekly rest period of 24 hours’ uninterrupted rest per week (or, at the employer’s choice, 48 hours’ per fortnight)
A rest break of 20 minutes when a day’s working time is more than six hours
Young workers (those over compulsory school age but under 18) have greater entitlement to rest breaks than adult workers:
- A daily rest period of 12 consecutive hours
- A weekly rest period of 48 hours
- A rest break of 30 minutes where daily working time is more than four and a half hours
The National Living Wage
The current National Minimum Wage (NMW) also known as the living wage in the UK is updated annually in April. At the time of writing, the current minimum hourly rates, are:
From 7 April 2024
Age 21+ £11.44
Age 18-20 £8.60
Age 16-17 £6.48
Pensions schemes
Pensions automatic enrolment legal duty
All UK employers have a legal duty to automatically enroll what are referred to as their “eligible jobholders” into a pension scheme which meets certain minimum standards.
An “eligible jobholder” is a worker who:
- is aged between 22 and the UK State Pension Age
- earns at least £10,000 a year (£833 per month or £192 per week)
- normally works in the UK (this includes people who are based in the UK but travel abroad for work)
UK employers must assess a worker at the start of employment to determine whether they are an “eligible jobholder” and need to be automatically enrolled into a pension scheme.
Employers can choose to utilise postponement which allows them to delay automatically enrolling an “eligible jobholder” for up to three months after the start of employment.
Once automatically enrolled into a pension scheme, there is also a legal duty to make pension contributions to the scheme.
The current statutory minimum pension contribution is 8% of “qualifying earnings”, which are earnings above £6,240 up to and including £50,270 per year. An employer must contribute at least 3% of “qualifying earnings” and, if so, an employee or worker contributes 5% of “qualifying earnings”.
In addition to other statutory requirements, an employer is required to issue statutory communications to employees or workers about how automatic enrolment affects them. An employer must also submit a declaration of compliance to the Pensions Regulator within a certain timescale.
An employer must also go through a process every three years which is referred to as automatic re-enrolment where the employer automatically re-enrolls any “eligible jobholder” who have opted-out of a pension scheme in the preceding three years.
Pensions arrangements by choice
Whilst there is a legal duty to automatically enrol “eligible jobholders”, many UK employers choose to provide more generous pensions arrangements and have done so for many years before the pensions automatic enrolment legal duty was first introduced in 2012.
For example, some UK employers provide pension benefits which are known as defined benefits that are based on the amount of salary and length of employment. These benefits are difficult and expense to manage.
There are complex tax rules which relate to pension benefits as well. Some of these tax rules can have an impact on high earners.