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Last update: April 2008

United Kingdom

Employment Law

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Employment Regulations

Nationals of other EU member states are not required to obtain work permits and are allowed access to employment on equal terms with United Kingdom nationals. Foreign companies setting up operations in the United Kingdom and United Kingdom companies requiring non-EU personnel usually have no difficulty in obtaining work permits for senior executives. Employers should obtain work permits from the Department of Employment for prospective employees before they enter the United Kingdom. Social Security contributions are also payable and these are dealt with in the Taxation section.

 

Work Permits

The following do not need work permits:

  • Nationals of EEA (European Economic Area) countries (the EEA comprises the 25 EU member states - Austria, Belgium, Czech Republic*, Cyprus, Denmark, Estonia*, Finland, France, Germany, Greece, Hungary*, Ireland, Italy, Latvia*, Lithuania*, Luxembourg, Malta, Netherlands, Poland*, Portugal, Slovakia*, Slovenia*, Spain, Sweden - and also Norway, Liechtenstein, and Iceland)
  • People born in Gibraltar
  • Commonwealth citizens who were allowed to enter or to remain in the UK on the basis that a grandparent was born here
  • Husbands, wives and dependent children under 18 of people who hold work permits or who qualify under the above categories. NB. Nationals of those countries with a (*) above must apply for a registration certificate under the Worker Registration Scheme within one month of commencing a new job in the UK. Representatives of overseas firms who are seeking to establish a UK branch or subsidiary, and persons coming to the UK to set up a new business or takeover or join an existing business as a partner or a director, will not normally need a work permit but may have to obtain prior entry clearance at a British diplomatic post abroad. A simplified procedure is available for employees of multi-national companies transferring to a senior post in the UK or transferring for up to three years to develop their career.

Source: www.bakertilly.co.uk

 

The Employment Market

For an overlook about the UK's employment market and the performance of foreigners employees in the UK market, see the links below:

Organization for co-operation and economic development 's 2007 report

Home Office's online report

For any other useful information about UK, visit the Government's web site, which provides you a detailed overview.

If your company needs to hire people, both qualified employees and generic workers, the best solution to advertise your vacancies is through the Jobcentre Plus, a free government recruitment agency, which is part of the Department for Work and Pensions.
This Agency gives you the opportunity to circulate your job proposal all around the UK.
The website is: www.jobcentreplus.gov.uk

You could also advertise your vacancies on the Eures website, a European service linked with the Jobcentre Plus net, that gives you the opportunity to circulate your vacancies all around Europe.
You could also find useful to advertise through local private employment agencies if you need experienced workers. The agencies will usually ask the applicant for at least six months work experience in the UK and one or more references (both letters of references or previous employers' address.)

 

Engagement and Dismissal

No employee may be taken on without a contract of employment although this may take the form of a letter. The contract of employment must state as a minimum the following:

  • The name of the employer
  • Rate of pay and hours worked
  • Paid holiday entitlement (minimum 4 weeks)
  • Paid sick leave entitlement
  • Minimum notice of termination of employment
  • Details of any pension scheme
  • Clauses relating to health and safety
  • Disciplinary procedures
  • Grievance procedures
  • Description of the job or its duties
  • The workplace
  • Any relevant union agreements

Subject to some exceptions, such as a termination for discriminatory or health and safety reasons, an employee's contract of employment may be terminated for any reason within the first year, but thereafter termination without good reason and without following at least the statutory minimum disciplinary procedures may result in a claim by the employee for unfair dismissal. If successful the employee may recover compensation for loss of earnings for a reasonable period of time, but which is normally capped at a maximum of 58,600.

Less favourable treatment (including harassment or dismissal) on defined grounds such as race, gender, disability etc, will trigger liability for loss of earnings and an award for injury to feelings. Larger employers must consult unions or employee representatives before making 20 or more people redundant. Employees made redundant are entitled to redundancy payment in addition to any payment in lieu of notice, according to a laid down scale.

The Conservative government greatly changed British labour laws in a series of Acts during 1980-93. The Labour government, in power since May 1997, has left much of this legislation in place. But it has introduced various new measures, including a "welfare-to-work" scheme (called the New Deal) for the unemployed, recognition rights for trade unions and new employment rights for individuals. Various "family-friendly" measures, such as generous maternity leave, are available, and a statutory minimum wage applies.

The ordinary retirement age in the UK is 60 years for women and 65 for men; these are the ages for state-pension eligibility. The government has announced an increase in the retirement age for women (under the state-pension scheme) to age 65, which will be phased in over 2010-20. Occupational pension managers are making similar changes, and they are not barred from introducing them earlier. The Sex Discrimination Act makes it illegal for companies to retire female staff if a man of the same age is allowed to continue to work.

Source:www.bakertilly.co.uk

 

Employees' Rights and Remuneration

The major laws governing labour/management relations are the 1980 Employment Act, 1982 Employment Act, 1984 Trade Union Act, 1988 Employment Act and 1990 Employment Act.

The 1993 Trade Union Reform and Employment Rights Act gave pregnant employees a minimum of 14 weeks' maternity leave (since extended, see below) and strengthened other employee rights. The 1999 Employment Relations Act introduced a statutory procedure for trade unions to obtain recognition to negotiate on behalf of the workforce or a bargaining unit within the workforce (in companies with more than 20 employees). The legislation also gives employees the right to be accompanied by a trade-union representative during grievance or disciplinary procedures, regardless of whether their company recognises unions.

The Act also strengthens various individual rights (including maternity leave) and implemented EU directives on parental leave and part-time work.

The 2002 Employment Act further broadened family leave and addressed other issues such as dispute resolution in the workplace and rights of fixed-term employees.

EU legislation on worker information and consultation (the European Information and Consultation Directive) took effect for firms with 150 or more employees from April 2005, and it will take effect for those with 100 or more from April 2007 and for those with 50 or more from April 2008. The directive gives staff the right to be informed and consulted on a regular basis about issues in the company in which they are employed. For the rules to apply, a request must be made by at least 10% of employees in the organisation (or employers may choose to introduce the process).

A directive on parental leave (96/34/EC) came into force in the UK from December 15th 1999, applying to children who were younger than age five on that date. It gives mothers and fathers the right to 13 weeks of unpaid leave to care for each of their children up to the age of five. Employees qualify after one year of continuous service, and they must give at least four weeks' notice prior to taking leave.

EU laws proposed under the heading of health and safety are adopted by majority voting. Such legislation includes the directive on working time.

Source: Deloitte - International Tax and Business Guide

 

Working Hours

Employees in the UK have gradually come to work a shorter basic week, although hours worked generally exceed those in other European countries. The average actual weekly working hours for all full-time workers was 37.2 in April-June 2005, according to the Labour Force Survey. Men worked 39 hours per week and women 33.8.

The EU's Working Time Directive (93/104/EC) imposes statutory limits on the average working week throughout the Union. It took effect in the UK in October 1998. The directive sets a maximum average working week of 48 hours, minimum daily rest of 11 hours, at least one rest day per week, limits on night-work and four weeks of annual holiday.

The overtime pay rate is usually higher than the basic rate, with Saturday work commanding a higher premium than weekday overtime (when a five-day week prevails). Work on Sundays and holidays often involves payment of a 100% premium.

Amended rules on sex discrimination took effect from October 1st 2005, implementing the Amended Equal Treatment Directive.

 

Pensions

The state provides a flat-rate pension and the State Second Pension (S2P), which replaced the State Earnings Related Pension Scheme (SERPS). National insurance contributions (NIC) payable by employers and employees who "contract out" of S2P are lower than the contracted-in rates, which entitle employees to the state second pension. The employer, not the employee, decides to contract out for an occupational pension scheme. However, employees are no longer forced to join company pension plans but may instead subscribe to personal pension plans and gain the contracting-out rebate.

 

Termination of Employment

Companies must usually pay compensation to dismissed employees and give employees at least one week's notice before termination. Under the 1980 Employment Act, employers must inform both the government and the relevant unions at least 30 days in advance if 20-99 employees face dismissal, or 90 days in advance if 100 or more employees are to be laid off.

Employers must provide severance pay at dismissal for all redundant employees with at least two years of service. For each year of service performed from ages 18-21, the redundant employee receives a half-week of pay; from ages 22-40, one week of pay; and from ages 41-65, one-and-one-half weeks of pay. Payments are based on the last wage earned, up to a maximum of 250 a week, and the maximum payment is 30 weeks of pay as a basic award. A tribunal can make additional awards for unfair dismissal, sex or race discrimination, or for dismissal arising from membership or non-membership in a union. The tribunal may order reinstatement, failing which the award is increased. The qualifying period for claiming unfair dismissal is one year of continuous employment.

Draft regulations on age discrimination, due to take effect from October 2006, would give workers over the age of 65 the same rights as younger workers with regard to unfair dismissal and redundancy. Employers would also have a duty to consider an employee's request to continue working after the age of retirement. The government has developed a new pension vehicle, termed the stakeholder pension, which became available in April 2001 and had to be offered by qualifying employers from October 2001. Companies with five or more staff and that do not already have a company pension scheme must offer stakeholder pensions to their employees. Employers must shoulder the administrative costs of setting up and running the scheme, which include deducting employees' contributions from pay. Employee participation in the scheme is voluntary, as are employer contributions to their employees' pensions.

All employees in private pension schemes have the right to carry their occupational pensions from job to job, although there are limits to the indexation of benefit levels on leaving earlier jobs.

Pension reforms taking effect from April 1st 2006 provide greater scope for tax-deductible pension contributions.

Source: Deloitte - International Tax and Business Guide

 

Wages and Benefits

Government law set out in detail the minimum wage every worker is entitled to receive.  These laws also identify which workers are entitled to receive overtime pay for working longer hours.

The wage and hour laws are meant to protect employees, and to ensure that their employers treat them with fairness in terms of payment for work done.

There are three levels of minimum wage, and the rates from 1st October 2007 are:

  • 5.52 per hour for workers aged 22 years and older
  • A development rate of 4.60 per hour for workers aged 18-21 inclusive
  • 3.40 per hour for all workers under the age of 18, who are no longer of compulsory school age.

Working week is 37-40 hours.

Source: HM Revenue & Customs

 

Employment of Foreigners

Employment of EU People:

If you are a British citizen, a Swiss national or a national of a country in the European Economic Area (EEA) you do not need a permission to work in the United Kingdom. The EEA includes these countries: Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain and Sweden.

Iceland, Liechtenstein and Norway are not members of the European Union (EU). However, the European Economic Area Agreement gives nationals of these countries the same rights to enter, live in and to work in the United Kingdom as EU citizens.

The statement by the Home Secretary to Parliament on 23 February announced that workers from the new member states must register with the Home Office.

Nationals from the following new member states: Poland, Lithuania, Estonia, Latvia, Slovenia, Slovakia, Hungary and the Czech Republic who find a job in the United Kingdom are required to apply to register with the Home Office under the new 'Worker Registration Scheme' as soon as they find work.

For more information about the "work registration scheme", please click here.


Employment of Non EU People:

If you want to work in the United Kingdom, you should check that your status allows you to do so before taking up employment. Not everyone who comes to the UK is allowed to work. You can check if you are allowed to work by looking at the stamp in your passport. It is often not possible to change your status from inside the UK. You may need to leave the UK and apply for entry clearance. Your status may only allow you to stay in the UK for a limited time. In some cases, when the time is finished, you cannot apply to stay longer. If you are eligible to extend your stay in the UK, you will need to make an application before your original permission ends.

If you are currently outside the United Kingdom, you may need to apply for entry clearance before you travel. UK visas, a joint Home Office and Foreign and Commonwealth Office department, through visa sections in some British diplomatic posts around the world, operate the entry clearance process for the United Kingdom.

The need to apply for entry clearance will depend on your current nationality and the scheme under which you wish to come to the United Kingdom. Before you make your entry clearance enquiry, you will need to know which scheme you are interested in applying for.

If you are a prospective worker and want to know which documents you have to provide and which scheme do you need to apply for, see the websites below:

Do I need a UK visa?

Working in the UK

If you are a company and you would like to employee foreigners, you first need to check you are employing them legally.
To check all the steps you need to do, in order to verify if you are employing someone legally, and to know all the documents you have to provide, check the website below:

Employing migrant workers

For further information please go to:

Please note that this information was last updated in April 2008. The Information shown is for guideline purposes.  For precise and up-to-date information please contact the IPTU team or visit the country government website. 

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