Establishing a UK-based workforce: employment and compliance considerations

The UK has one of the most developed employment law frameworks in the world, but how it is evolving needs to be understood in the context of the UK government’s Employment Rights Bill (ERB) (310 pages/15 MB), which will soon become law.

From onboarding to termination, and from payroll to privacy, this guide outlines the legal obligations, serving as a reminder that informed management of UK employment rights is essential. This guide focuses on the law in England, Wales and Scotland. Laws in Northern Ireland are similar but do differ.

Contracts and employment particulars

In common with other jurisdictions, a contract of employment will set out key rights and obligations. However, in the UK there is a statutory requirement for a written statement of employment particulars which must be provided to workers on their first day.

This document must contain prescribed information around essential items such as job title, pay, working hours, holiday entitlement and notice periods. It also includes information on pensions, disciplinary procedures, and any probationary periods.

The detail required in written statements is usually contained in the contract of employment, but other documents can be used if needed provided the statutory requirements around reliance on additional documents are complied with. Failure to issue this statement can result in tribunal claims, with compensation capped at four weeks’ pay.

While not legally required, many employers also include policies on equal opportunities, flexible working and employee conduct, to reinforce workplace standards. Contracts also commonly include terms such as restrictive covenants – which will only be upheld in so far as they protect the legitimate business interests of the employer – confidentiality, and intellectual property provisions.

Pay and benefits 

Minimum wage requirements

The UK’s national minimum wage structure is tiered by age, but the government is working towards removing age banding. As of April 2025, the national living wage for workers aged 21 and over is £12.21 per hour. Younger workers and apprentices receive lower rates, with strict enforcement mechanisms in place. Employees can access their pay records and challenge underpayment through tribunals.

Equal pay

The Equality Act 2010 (34 pages/1.2 MB) mandates equal pay for equal work, regardless of gender. Employers with over 250 staff must publish annual gender pay gap reports, highlighting disparities in pay and bonuses between male and female employees. New legislation will introduce ethnicity and disability pay gap reporting and a requirement to publish action plans to show how gender, ethnicity and disability disparities are being addressed.

Statutory sick pay

Employees are entitled to statutory sick pay (SSP) of £118.75 per week for up to 28 weeks, provided they earn at least £125 per week and are off work for four or more consecutive days. Many employers supplement SSP with contractual sick pay, often offering full salary for a limited period. However, changes in the ERB mean sick pay will be available from the first day of sickness. Rights to sick pay will also be opened up to workers who are currently excluded because they earn below £125 per week, although a scaled rate will be payable for lower earners.

Pensions

Workplace pensions are compulsory under auto-enrolment legislation. Employers must contribute at least 3% of qualifying earnings, with employees also contributing and receiving tax relief. Non-compliance can result in significant penalties.

PAYE and national insurance

Pay as you earn (PAYE) is a statutory system which obliges UK employers to deduct tax from employees’ earnings when salaries are paid. Tax rates depend on the income level of the employee. Scotland applies different tax rates compared to England and Wales.

National insurance employer and employee contributions also apply.

Working time

Working time regulations cap the average working week at 48 hours, although employees may opt out of this cap. There are additional protections around night work, breaks, daily and weekly rest.

Full-time employees are entitled to 5.6 weeks of paid annual leave, which may include public holidays. Part-time workers receive a pro-rated amount, although special accrual rules apply to irregular hour workers and part-year workers. Employers must pay “normal remuneration” for four weeks of the annual leave entitlement and this includes regular overtime and commission. Basic pay can be paid for the balance of 1.6 weeks of annual leave. Unused leave may be carried forward in certain circumstances, including maternity and other family-related leave or sick leave. Upon termination, employees are entitled to payment in lieu of unused leave.

The ERB will introduce new rights for zero-hour and low-hour workers to: reasonable notice of shifts; payments for shifts cancelled, moved and curtailed at short notice; and a right to request guaranteed hours. The new rights will also apply to agency workers.

Discrimination

An employer may not refuse employment or treat employees less favourably on the grounds of sex, marital status, pregnancy, race, religion or belief, sexual orientation, gender reassignment, disability or age. The person against whom such action is taken may claim compensation – and there is no upper limit on the compensation which can be awarded.

Employees are also protected from harassment on the basis of any of these protected characteristics and employers have a proactive duty to take reasonable steps to prevent sexual harassment in the workplace. Employers must also make reasonable adjustments to remove disadvantages disabled employees may encounter in the workplace.

Part-time workers and fixed-term employees must not be treated less favourably than comparable full-time or permanent workers unless the treatment can be objectively justified.

Family-friendly rights

Maternity and paternity leave

Female employees are entitled to 52 weeks of maternity leave – 26 weeks of ordinary leave and 26 weeks of additional leave. Statutory maternity pay (SMP) is paid for up to 39 weeks, starting at 90% of average earnings for six weeks, followed by a flat rate of £187.18 per week – or 90% of earnings if lower.

Fathers and partners with qualifying continuous employment of 26 weeks can take one or two weeks of paternity leave, separately or consecutively, paid at the same rate as SMP. This must be taken within one year of the child’s birth. The ERB will make paternity leave a ‘day one’ right with no qualifying length of service.

Other parental leave rights

A shared parental leave scheme allows parents to split up to 50 weeks of leave and 37 weeks of pay. Leave can be taken in blocks or simultaneously, although employers are not always obliged to accept proposed patterns. Adoptive parents receive similar rights, with one parent eligible for adoption leave and the other for paternity leave.

Employees with over one year of service can take 18 weeks of unpaid parental leave per child, usable until the child turns 18. The ERB will make this a day one right with no qualifying length of service.

Employees are also entitled to up to 12 weeks of paid leave if their baby requires neonatal care within the first 28 days after birth.

Parents who lose a child under 18 or suffer a stillbirth after 24 weeks are entitled to two weeks of bereavement leave. Statutory pay is available for those with at least 26 weeks of service. The ERB will create a day one right to unpaid bereavement leave for all workers.

Redundancy and dismissal protections

Pregnant employees and some new parents have special protection in a redundancy situation which means that for a protected period an employer must offer any suitable alternative vacancies to the protected employee. The ERB will further strengthen protections against dismissal for pregnant workers and other family leavers/ returners.

‘Dependant’ leave and flexible working

Employees are also entitled to one week of unpaid leave every 12 months to give or arrange care for a ‘dependant’. Time off for domestic emergencies involving dependants is also permitted, although payment is at the employer’s discretion.

Additionally, employees have a right to request flexible working from day one of employment. Two requests can be made in a 12 month period and the business needs to follow a statutory procedure and have at least one of eight statutory reasons to refuse any request. Grounds for refusal include extra costs that will damage the business and that the work cannot be reorganised among other staff.

The ERB provides a framework to take this further – by requiring employers to push back against flexible working requests only where there is one of the current statutory grounds for refusing a request and establishing that it is reasonable for the employer to refuse the application.

Ending employment

Employees are entitled to statutory notice periods based on length of service ranging from one week, after one month of service, to 12 weeks, after 12 years. However, contracts may specify longer periods. Termination without notice is only lawful in cases of gross misconduct, such as dishonesty or serious insubordination. Fair procedures must be followed when an employer is contemplating dismissing or taking disciplinary action against an employee or where an employee raises a grievance with the company. There is an Acas code of practice in place which provides guidance. If this code of practice is not followed by the employer or employee, a tribunal can adjust compensation upwards or downwards by up to 25%.

Employees with over two years’ service can claim unfair dismissal if terminated without a fair reason or proper procedure. Valid reasons include conduct, capability, redundancy, legal restrictions, or “some other substantial reason”. The employer must also show that it has acted fairly in carrying out the dismissal and this is why a proper procedure is important. Compensation is capped at £118,223 or one year’s salary, but compensation is uncapped in some circumstances such as when an employee is dismissed because they made a whistleblowing allegation. The ERB will introduce a day one right to unfair dismissal which will be subject to the ability to dismiss during a probationary period, which may be nine months, if a ‘lighter touch’ process is followed by the employer.

Employees dismissed due to redundancy are entitled to statutory redundancy pay after two years’ service. Payments are based on age, service length and capped weekly pay (£719). Employers must collectively consult if 20 or more redundancies are proposed at the same establishment within 90 days. However, the ERB will introduce a requirement to collectively consult if there is a threshold number of dismissals across more than one establishment – this new threshold is still to be set.

The ERB introduces measures to restrict the ability to use ‘fire and rehire’ by amending the law on unfair dismissal so that, where employees are dismissed for failing to agree to a change in their contract of employment, those dismissals will be treated as automatically unfair unless the employer can show evidence of severe financial difficulties and demonstrate that the need to make a contract change was unavoidable.

Dispute resolution

Employment disputes are typically resolved through employment tribunals, which handle most employment law claims. Disputes can also be settled via settlement agreements, which require employees to obtain independent legal advice. These agreements are often used to avoid lengthy procedures, particularly for senior staff.

Whistleblowing

Whistleblowing is a key corporate governance concern in the UK, as it is globally. It is unlawful to subject a worker to a detriment because they have made a protected disclosure. As explained above, it will be an automatic unfair dismissal if an employee is dismissed because a whistleblowing allegation has been made and compensation for these claims is uncapped.

Any non-disclosure agreement that attempts to prevent workers from making a protected disclosure will be unenforceable. Individual employees can also be personally liable, alongside the employer, in relation to some whistleblowing detriments. Employers should have a whistleblowing policy and procedure as part of their governance framework. The law is supported by government guidance and a code of practice. 

Immigration

Most non-UK nationals require a visa to work in the UK and there are various options. Visa fees vary, with additional costs for sponsorship licences and certificates of sponsorship, and an immigration health surcharge. Employers must verify the right to work of all employees and retain evidence.

Failure to comply can result in fines and criminal charges.

Data protection

Under the UK General Data Protection Regulation (GDPR) (123 pages/3.49 MB), employers are ‘data controllers’ and must comply with seven principles, including lawfulness, data minimisation, and accountability. Employees have the right to submit subject access requests to view their personal data. The Information Commissioner’s Office (ICO) oversees compliance. Most employers must register with the ICO and implement various policies to comply with data protection obligations.

Health and safety

Employers must maintain a health and safety policy, appoint a responsible individual, and comply with inspections by the Health and Safety Executive. Failure to comply can lead to improvement notices, prohibition orders, or criminal prosecution. Employer’s liability insurance is mandatory, and certificates of insurance must be displayed at relevant premises.

Trade unions and collective rights

While union influence has declined, many employers voluntarily recognise unions for collective bargaining purposes. A union can also apply to the Central Arbitration Committee for statutory recognition if it has the required level of support within the proposed bargaining unit. Statutory ballots and employer notifications are needed before industrial action can be taken.

The ERB will make the union recognition process and the process needed to take industrial action easier for unions. All unions, whether recognised or not, will have the right to request physical and digital access to workplaces.

Union members and representatives also have various protections relating to their union membership and the taking of industrial action, including in respect of dismissal and other detriments.

Employers with over 50 employees may also face requests to establish an information and consultation body which does not involve an independent trade union.

Transfer of employees

The Transfer of Undertakings (Protection of Employment) Regulations 2006 protects employees in the event of a change of employer on a transfer of an undertaking – typically a business sale or a service provision change.

Certain employees employed in the transferring entity can transfer with the undertaking and become employed by the new owner or service provider under their original contracts of employment. The new employer takes over all employment rights and liabilities of the previous employer, except for limited transfer of pension rights.

Any dismissal by reason of the transfer, whether before or after the transfer, is automatically unfair unless there is an economic, technical or organisational reason for the dismissal entailing a change in the workforce. Employees must be informed about the transfer and consulted if the new employer proposes any measures that affect them. The new employer needs to be provided with minimum information relating to the employment of transferring staff.