The essential Labour Law in UK

These are the highlights if you want to know about the essential Labour Law in UK.  This entry was drafted by McCarthy Denning Law Firm ”E-IURE COMPENDIUM” 2018. Link to e-IURE Network

This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want -or need – legal advice, ask for a lawyer or a law firm. In that case “McCarthy Denning Law Firm” is an excellent option in UK.

Employment law in the UK is based on both common law and statute.  Although the employment law regime is not as onerous for employers as in many other European countries, in recent years there has been a significant increase in employment regulation, in particular, with the implementation of EU Directives.

Employment Contracts

An employer is required to provide an employee with a written statement of specified employment particulars within two months of the start of their employment.  This includes details of the disciplinary, dismissal and grievance procedures that apply to his employment.  Any changes to the statement must be notified within one month of the date of the change.

Cost Of Dismissal And Wrongful Dismissal

There are two issues to consider when dismissing an employee: contractual rights and statutory rights.

Contractual Rights

If an employee’s contract of employment is terminated in breach of that contract, the employee may be entitled to claim damages for wrongful dismissal or breach of contract.  The amount of damages claimed will be the sum that would put the employee in the position he would have been in had the contract been terminated correctly.  Usually, this is the amount of salary and benefits to which the employee would have been entitled during the notice period or until the end of any fixed term contract.  This entitlement to damages is subject to the employee’s duty to mitigate the losses he suffers by finding alternative employment. Claims for breach of contract may be brought either in the High Court or the County Court or, for claims limited to £25,000 in an employment tribunal.

Statutory Rights

Statute provides for minimum periods of notice.  After the employee has been employed for one month, the employee is entitled to receive one week’s notice of termination for each complete year of service up to a maximum of 12 weeks’ notice for 12 years of employment.  The employer is entitled to receive at least one week’s notice of termination from the employee, irrespective of the employee’s length of service.  However, usually the contract provides for a period of notice which can be more generous (but not less generous) than the statutory minimum.

It is significant to note that for claims in the Employment Tribunal, each party bears their own costs so costs are not awarded against the unsuccessful party save in exceptional circumstances. This is different than the position in the civil court where costs will usually be awarded against the unsuccessful party.

Unfair Dismissal

For employees who have two year’s continuous employment with the employer, it is open for such employees to bring a claim for unfair dismissal in the employment tribunal.  It should be noted that certain unfair dismissal claims (for example, dismissal for family reasons, including pregnancy, statutory maternity, adoption or parental leave, or dismissals for whistleblowing, for exercising a statutory right or for trade union membership) do not require a qualifying period of employment to be able to bring a claim.

In order to avoid claims for unfair dismissal, an employer should ensure that employees are only dismissed for a “fair” reason, following a “fair” procedure.  The five potentially “fair” reasons for dismissing an employee are conduct, capability (ie competence or on health grounds), redundancy, statutory bar or “some other substantial reason” justifying the dismissal of an employee holding the position held by that employee.  The procedures to be followed in relation to each category of potentially fair reason for dismissal are slightly different but they all involve consultation with the employee before the dismissal. The Tribunal will also consider whether the employer has acted reasonably in all the circumstances in treating the reason for the dismissal as a sufficient reason for dismissing the employee.

In interpreting whether the employer acted reasonably, the courts and tribunals will look to see whether the employer followed a fair procedure when dismissing an employee.  In relation to dismissals for conduct and performance, this includes following the ACAS Code of Practice and Disciplinary and Grievance Procedures.  Employers must follow fair processes or risk both unfair dismissal and an uplift to compensation, at the discretion of the Employment Tribunal.  In determining whether such an uplift should be applied, the Tribunal shall take into consideration the extent to which the employer has complied with the ACAS Code.

If an employee is successful in bringing an unfair dismissal claim, an employment tribunal can order reinstatement, re-engagement or compensation.  Compensation is the most common award and comprises the following elements:

• a basic award which is calculated in the same way as a statutory redundancy payment depending on the age and length of service of the employee and a week’s pay, which is currently capped at a maximum of £489 per week;
• a compensatory award which will be assessed on the basis of the losses suffered by the employee. The maximum award is currently £80,541 (this figure is usually raised annually in April).

Employment Contracts For Directors

Employment contracts for directors are commonly referred to as service agreements and should be approved by the board of directors of the company before they are entered into.  They usually contain more onerous provisions specifying the director’s duties to the company as well as protection for the company’s confidential information, “garden leave” provisions, intellectual property rights, and restrictions on activities during employment and possibly post termination restrictive covenants.  It is also common for directors to have longer contractual notice periods than other employees. A service agreement usually provides for the director to resign his office of director on termination of the employment.   There is no special regime for the employment of directors.  However, there are requirements in the Companies Act 2006 which limit the guaranteed term of a director’s service contract to less than two years without the prior written consent of the shareholders of the company. There are also special provisions regarding notice and remuneration which apply to directors of UK quoted companies

Wages And Other Types Of Compensation

The National Minimum Wage Act 1998 specifies a minimum wage for employees over 18.  Currently, the rates are as follows: for employees over school age but under 18 the minimum wage is £4.05 per hour, for employees aged 18-20 it is £5.60 per hour and for employees aged 21-24 it is £7.05 per hour, and for employees aged 25 and over, it is £7.50 per hour.  These rates are usually revised annually.

The requirement to work overtime and additional payment (if any) for overtime worked is something which is usually dealt with by the employee’s contract of employment.

Auto-Enrolment Pensions

The obligation to designate a stakeholder pension scheme was abolished with effect on  1 October 2012, although an employer can continue to operate an existing stakeholder scheme for the time being.  Transitional protection is, however, available for an employee who was already a member of their employer’s stakeholder scheme on 1 October 2012, provided certain conditions are met.

New auto-enrolment duties came into force on 30 June 2012. They are being phased in over a period of five-and-a-half years that started on 1 October 2012 and will eventually apply to all employers in the UK.  Once an employer is covered by the new duties, it will be required to auto-enrol its eligible workers – referred to as “jobholders” – in a pension scheme meeting specific standards unless the jobholders are already active members of the employer’s qualifying pension scheme. A jobholder can opt out of the pension scheme in which he has been auto-enrolled, but if he does not do so the employer will be obliged to pay minimum pension contributions as long as the worker remains an active member.

Once it is subject to the new duties, the employer must ensure that all its eligible jobholders are enrolled in an automatic enrolment scheme with effect from their automatic enrolment date, unless they are already active members of a qualifying scheme or unless a specific statutory exception applies.  A key point to note is that the new employer duties apply to an employer automatically by law once it reaches its staging date. They do not amount to a change to a jobholder’s terms of employment requiring any consultation with jobholders. Neither is any consultation necessary under the legislation that requires consultation before changes to pension schemes are made.

Insurance Benefits

It is common in the UK for employers to provide their employees with insurance benefits. The most common benefit is probably private medical insurance.  Other benefits which are often provided are life insurance, travel insurance, permanent health insurance and critical illness insurance.  Whether or not an employer provides these to employees is a matter for the contract.  Where such benefits are provided, the contract should be carefully drafted to ensure that the employer reserves all necessary rights and does not put himself in a position where he is contractually obliged to provide a benefit for which he is not insured

Employment Regulations

The following is a brief summary of some of the main statutory provisions which employers must be aware of when employing employees in the UK:

Working Time

The Working Time Regulations 1998 imposes a limit on employee’s working time of an average of 48 hours a week averaged over a 17 week reference period.  Individual employees can choose to work longer than this by signing an opt-out agreement with their employer.  There are also requirements for minimum rest breaks and daily and weekly rest periods. There are special provisions for night work.

Holiday

Employees are entitled to 28 days’ paid holiday each year (including bank and public holidays) under the Working Time Regulations 1998.  There are eight recognised public holidays per year which are included in this minimum entitlement.  Employers are free to agree a more generous contractual entitlement and in the UK it is common for employers to allow paid holiday entitlement of between 20 and 30 days and for bank and public holidays to be given in addition to this entitlement.

Sick Pay

There is a statutory entitlement to sick pay for up to 28 weeks under the Social Security Contributions and Benefits Act 1992.  The current statutory sick pay rate is £89.35 per week but will increase on 6 April 2018.  The first three days of any sickness are “waiting days” when no sick pay will be payable.  It is open to employers in the UK to agree to a more generous contractual sick pay arrangement and it is common practice to do so.

Redundancy

If an employee with two or more years’ continuous employment is dismissed by reason of redundancy, he is entitled to receive a statutory redundancy payment from his employer.  The amount of the redundancy payment is calculated by reference to the employee’s age, length of service and weekly pay (subject to maximum of £489 per week).  The maximum statutory redundancy payment (or basic award) is currently £14,670.

Discrimination

Currently under English law, discrimination on the grounds of sex, race, disability, sexual orientation, age and religion or belief is unlawful.  Compensation for workers who successfully bring discrimination claims against their employers is potentially unlimited and can include a claim for injury to feelings.

Protection for Part-Time and Fixed Term Employees

It is unlawful for an employer to subject to a detriment or treat part-time or fixed term workers less favourably than full time staff unless such treatment can be objectively justified. A worker whose fixed term contract is successively renewed will be considered a permanent employee after four years of continuous employment.

Data Protection

Employers have a duty to notify their staff as to the personal and sensitive personal data they hold, to tell them how it will be processed and to obtain their consent to process the data.  Such data must be kept securely.  Data must be processed in accordance with the provisions of the Data Protection Act 1988 and the various Data Protection Codes issued by the Information Commissioner’s Office.  Failure to comply carries civil penalties.  Workers have the right to request copies of personal data held in relation to them by the employer.

Maternity Rights

All pregnant women have the right to paid time off for antenatal care in preparation for the birth of their baby.  Pregnant employees are entitled to six months ordinary maternity leave from work and then an additional maternity leave period of six months, regardless of their length of service with their employer.

Employees on maternity leave who meet the eligibility requirements are entitled to statutory maternity pay which is pay of up to 90% of the employee’s salary for the first six weeks of maternity leave and either £140.98 per week or 90% of normal weekly earnings if lower for the next 33 weeks.  A high percentage of this payment is recoverable by the employer out of his National Insurance contributions.

Paternity Rights

Employees with more than 26 weeks’ employment may take up to two weeks’ paternity leave.  Employees who take this leave are entitled to all benefits except pay but they are entitled to statutory paternity pay which is currently £140.98 per week or 90% of normal weekly earnings if lower.

Shared Parental Leave Rights

New statutory provisions introduced an entitlement for employees who are parents (whether by birth or adoption), to take shared parental leave (SPL) in the first year of their child’s life or in the first year after their child’s placement for adoption.

The shared parental leave scheme makes up to 50 weeks of SPL and 37 weeks of Shared parental pay available for eligible parents to take or share (that is, everything other than the two week compulsory maternity leave period or an equivalent two-week period in adoption cases). A mother or primary adopter is able to end their maternity or adoption leave, or commit to ending it at a future date, and share the untaken leave with the other parent as SPL. This enables mothers and primary adopters to return to work before the end of their leave without sacrificing the rest of the leave that would otherwise be available to them. SPL can either be taken consecutively or concurrently, as long as the total time taken does not exceed what is jointly available to the couple.

Adoption Rights

The adoption regime provides essentially the same leave and pay rights and requires the same qualification provisions as the maternity provisions.  Statutory adoption leave (SAL) is available for up to 52 weeks’, 39 weeks paid and 13 weeks unpaid. Statutory adoption pay (SAP) is paid at a flat rate which is currently £140.98 per week for the 39-week pay period, or 90% of average weekly earnings if lower. There is no enhanced pay for the first six weeks of SAL. Under the new system of shared parental leave, eligible adoptive parents can share the statutory adoption leave and pay that was available only to the primary adopter.  The right for the parent who is not the primary adopter to take two weeks’ ordinary paternity leave remains.

Parental Leave

Employees with one year’s employment can take up to 18 weeks’ unpaid leave for each child up to the child’s eighteenth birthday. This right transfers with the employee when he/she changes employer.  Statute provides a scheme which allows parental leave to be taken in blocks of one week or more although no more than four weeks in any year.  However, employers can agree arrangements that are more generous and in particular which permit leave to be taken in blocks of less than one week.

The Right to Request Flexible Working

Employees have the right to request flexible working arrangements from their employer. The employee must have 26 weeks of continuous employment and the employee must not have made another application to work flexibly under the right to request legislation during the preceding twelve months in order to be able to fulfil the requirements to request flexible working arrangements. The employer has an obligation to consider the request and give a reason for any refusal.  A refusal to consider a request for flexible working arrangements from a female worker with childcare responsibilities may amount to indirect sex discrimination if it cannot be justified on objective grounds.

Time off to Care for Dependants

Employees may take a reasonable amount of unpaid time off to deal with family emergencies.