Hiring a workforce in the UK provides access to skilled and highly educated employees, but employers must comply with labor laws to avoid penalties and reputational damage. We look at the most common UK labor laws to support your employment efforts and prevent non-compliance.
1. Employment Contracts
Full-time, part-time, and fixed-term employment contracts are recognized in the UK. Both full-time and part-time employees must receive a written statement on the first day of employment, covering working hours, annual paid leave, benefits, and wages. Fixed-term contracts must specify the end date of employment or the type of project. Full-time employees and those with fixed-term contracts have equal rights. It is important to note that fixed-term contracts renewed for more than four years will automatically become permanent.
2. Working Hours and Overtime
Employees complete 48 hours of work per week; however, individuals over 18 years of age can negotiate extended working hours. Employees who work for six consecutive hours must receive a 20-minute break.
According to UK labor law, employers are not obligated to pay employees for overtime work. However, the average hours worked and payments must be more than the national minimum wage. Overtime pay and calculations are usually included in the employment contract.
3. Minimum Wage
The UK established its minimum wage rates in April 2026. Employees older than 21 years of age are paid £12.71 per hour. Employees between 18 and 20 years old are paid £10.85 per hour.
4. Employee Benefits
The statutory employee benefits include paid annual leave, sick pay, national insurance contributions, and workplace pension contributions. Expectant mothers receive maternity leave, while the fathers receive paternity leave.
5. Payroll Tax or Social Contributions
Every UK employee must pay personal income tax (PIT) to the UK HM Revenue and Customs authority. The employer is responsible for deducting income tax from an employee’s salary using the Pay As You Earn (PAYE) system. Income tax rates are progressive, meaning they vary according to an employee’s earnings. A taxable income of between £12,571 and £50,270 pays a basic rate of 20%, whereas earnings over £125,140 pay income tax of 45% of gross salary.
Another type of tax that both UK employers and employees contribute to is the National Insurance Contribution (NIC). The contributions provide cover for the State Pension, Jobseeker Allowance, and national health insurance. Employees who earn more than £242 per week have contributions automatically deducted from their wages. If employees earn above a specific threshold, employers must contribute to the fund at no extra cost to the employee. Rates are calculated according to an employee’s earnings and their national insurance category letter.
6. Termination and Severance Pay
The employment contract ends upon the expiration of a fixed-term agreement or the dismissal and resignation of an employee. An employee’s resignation requires serving notice to the employer. But if an employee breaches the contract, an employer can dismiss the employee with or without notice. In the case of redundancy, employees must be given written notice. The written notice period depends on an employee’s length of service.
In the UK, severance pay is known as redundancy pay and is based on an employee’s age, length of service, and their weekly wages. For example, employees between the ages of 22 and 40 receive one and a half weeks’ pay for every year of service completed.
7. Foreign Workers
Before you can hire foreign workers, your business must obtain a government-issued sponsor license and then present the employee with a Certificate of Sponsorship (CoS). Along with the CoS, the foreign worker must have proof of the job offer that satisfies the skills requirements of the particular work visa. Employers in the UK are tasked with the license application, proof of owning a legitimate business, and guaranteeing that the job candidate meets the specified criteria.
While this process might seem complicated, an expert global PEO can manage every aspect of employing foreign workers. The UK PEO will collect the worker’s personal details and documentation and handle the application on your behalf.