Employment

Check-in UK

The UK has long been regarded as a springboard for businesses headquartered outside of the UK into the rest of Europe as well as a natural market for other European businesses to expand into. Many inward investors from outside Europe choose, at least in the early days, to service the rest of Europe from the UK. The English language and business culture together with fewer constraints on commerce and a highly skilled workforce make the UK an attractive place to do business. With the right planning - including specialist, co-ordinated advice at an early stage - the majority of all of the legal work needed to get started in the UK can be done quickly and inexpensively.

Taken from "Check-in UK", our concise guide to setting up and doing business in the UK, the following article examines the issues to be aware of regarding employment.

Employment

Employment laws in the UK can differ significantly from employment laws in other countries, particularly Asia Pacific, Middle Eastern and African countries where there has traditionally been less employee protection against dismissal and discrimination. Overall, UK employment law is seen as being more flexible and employer-friendly than in other European countries, often significantly so, with a number of recent changes in the UK introducing greater flexibility.

Hot topics

Independent Contractors

Hiring independent contractors (sometimes referred to as consultants) can seem an attractive option, especially if it means saving or delaying the costs of setting up an entity, registering for payroll and other related costs. However, care must be taken to ensure that the relationship is actually that of a genuine consultancy. If, as a matter of fact, the relationship is one of employer / employee, the individual will acquire employment law rights and the employer will be responsible for deduction of income tax and social security contributions from payments, which can quickly add up to a significant amount. Further, if the individual is effectively an employee, that could be sufficient to constitute a permanent establishment in the UK for tax purposes without having set up a UK entity or undertaken tax planning. Any intellectual property created by a contractor may also belong to the contractor rather than the business engaging them.

Unfair Dismissal

people in suits crossing the street After two years' complete service, each employee has the right not to be unfairly dismissed meaning that the employer has to have a legally "fair" reason to dismiss the employee. The employer should also follow a due process procedure before the dismissal or risk a successful claim from the employee. An employee who is unfairly dismissed may be entitled to compensation and it is rare for an employer to be ordered to re-instate the employee in employment. Compensation for unfair dismissal is currently (as at 6 April 2014) capped at the lower of one year's pay or £76,574. In addition, Employment Tribunals may impose a financial penalty on an employer of between £100 and £5,000 where it loses a claim and where "aggravating features" are present which may include deliberate, malicious or negligent behavior.

Right to Notice on Termination

Every employee has the right to a statutory minimum period of notice to terminate their employment. After one month's service, this is one week for each complete year of service up to a maximum of 12 weeks for 12 complete years. It is common for the employee and employer to agree a longer period of notice, especially for more senior employees. This should be considered when looking to hire new employees as their existing employer may require them to work their notice period which is typically one to three months or sometimes longer.

Key legal considerations

Minimum legal rights

Employees have minimum legal rights, including rights in connection with pay, hours of work, holidays, sick pay, family leave, notice on termination and dismissal. Although UK rules are extensive, they are generally less rigorous than the rules on employee rights in other European countries for example.

Employment Contract

Each employee has a right to and will expect a written statement of their terms or a contract of employment rather than a simple letter offering employment. The contract or statement must include basic terms such as pay, sickness absence, minimum holidays of 28 days inclusive of public holidays for full-time employment, notice periods and grievance and disciplinary procedures.

As there is no 'at will' employment in the UK (in contrast to some jurisdictions such as many states in the US), employers in the UK rely on the contract of employment to protect the company during and after employment. If there is no written contract then a court will imply what it considers reasonable and an employer may also be liable to the employee for failure to provide written terms and conditions of employment.

Non-Competition and Non-Solicitation provisions

Post-termination, non-competition and non-solicitation obligations can be enforced in the UK if they are reasonable. Non-competition agreements that are too wide in scope and duration cannot be enforced in the UK and some European agreements require the payment of an indemnity for some or all of the restriction period which is not necessary in the UK. Therefore, businesses should ensure that they have specific provisions for their UK employees.

Creation and ownership of intellectual property

Intellectual property created in the course of an employee's employment will be assigned to the employer. It is important to consider, in line with the business' IP strategy, whether this is appropriate or whether there should be a transfer of the IP to the parent company or another entity in the group. Intellectual property created by a consultant is owned by the consultant unless there is a written assignment in place between the consultant and the business.

Discrimination

Discrimination because of sex, race, disability, sexual orientation, pregnancy and maternity, marriage and civil partnership, religion, belief, age or gender reassignment is unlawful in the UK. Compensation is uncapped.

Settlement Agreements

Employers can obtain a full release of almost all potential employment claims from an employee in the UK. This must be in the form of a "settlement agreement" and the employee must obtain independent advice on the terms of the agreement for this to be enforceable.

Automatic Transfer of Employees

On the purchase and transfer of a business (or part of a business) and assets of a company, the contracts of employment of the employees working in that business transfer automatically to the buyer as if it had been the employer all along under the Transfer of Undertaking (Protection of Employment) Regulations 2006, known as "TUPE". All existing terms and conditions need to be honoured with the exception of certain occupational pension obligations. TUPE is the UK interpretation of European law which also applies in most other European countries. If acquiring a business or assets, or outsourcing/insourcing, whether in the UK or elsewhere in Europe, local advice should be obtained.

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