If you are thinking about hiring people from the United Kingdom for your American business, there are certain things you need to bear in mind. Luckily, EuroDev knows all about these differences between US and UK employment contracts and can guide you through the process.
UK Employment Contract
Employment Relationships in the UK are governed by UK Law. It is not mandatory to have an employment contract in place at the start of your employment but you need to create some sort of written statement within 2 months after the employee has started working for you. Obviously that is not recommendable, because there is no employment at will in Europe. Every employment relationship is governed by local law and this law describes what you need to include in the employment contract.
Types of contract
In the UK you can offer contracts for a limited time (also called fixed term contracts) – these end per a certain date – or permanent contracts. Fixed term contracts cannot last more than 4 years. After 4 years the contract will automatically become permanent, unless the employer can show there is a good business reason not to do so. Be aware that a temporary employee will have equal rights to an employee with an unlimited contract after 2 years of service. These can not differ in payment or in benefit offerings between employees on fixed term contracts and permanent contracts. That being said there are some differences:
|Notice Period||Minimum 1 week if worked at least 1 month & 1 week for every year worked||Minimum 1 week if worked not more than 2 weeks. After that 1 week for every year of employment|
|Probationary period||3-6 months.||3-6 months|
Working hours are governed by “Working Time Regulations” and any statements contained within contracts of employment should be in consideration of this. This means for example that you should also outline the lunch break you are giving.
Both the employer and the employee have to pay an amount to the UK tax system,‘Her Majesty Revenue and Customs’ (HMRC), as part of the monthly payroll. This system is called PAYE and requires timely reporting on the contributions on or before each payday. Employer contributions are approximately 17%. Since contributing to a pension scheme is mandatory, you will need to add a small percentage to your total costs, too. The employer has to deduct tax and National Insurance from all payments made to employees in the UK. This includes payment of salary, commissions, bonus, and paternity leave payment. In some situations you also need to deduct student loan repayments or pension contributions. If you run payroll yourself, you’ll need to report your employees’ payments and deductions to HMRC. Setting up payroll in the UK may look easy because there is no language barrier. But, we know there are a lot of differences between the UK and the US and a mistake is easily made.
Get in touch
If you need our employer of record services for your UK recruitment project, feel free to reach out to us so we can discuss your plans. Reach out to Monique Ramondt, Vice President of HRO, for more information.