Are you part of a company looking to hire a workforce in the UK? Whether you're a UK-based company or one based elsewhere, there is one big aspect of UK labour law that you need to be aware of: benefits.
You might have heard them referred to in different ways – working benefits, employee benefits or simply "benefits". But what are they? Who is entitled to benefits in the UK? Are there mandatory benefits that companies must provide? We'll answer all those questions in this article.
Within the UK's labour law, employee benefits refer to the non-cash provisions determined by a company and written within an employee's rewards package. While plenty of companies around the world offer benefits to their employees as a means of attracting top talent, there are many countries that have a set of benefits that are mandatory for all employers to offer. The UK is one of those countries.
There are two types of benefits that a company can add to their employment packages – statutory or mandatory and supplementary benefits. According to UK laws, not all who work in the UK are entitled to benefits. Let's talk about who is definitely entitled to employee benefits.
There are a few employment statuses that you should be aware of when hiring in the UK – "employee", "worker", and "self-employed". Only employees and workers are entitled to receiving benefits, and it should be noted that both terms carry distinct meanings within the eyes of UK labour law. In a nutshell, "employees" are the traditional full-time workers who have signed contracts with their employers. On the other hand, "workers" are temporary staff – those who have agreed to work for a company for a specific amount of time, such as gig economy workers.
Although both employees and workers are entitled to benefits, there are certain statutory benefits that employees are entitled to that workers are not.
Employment classification is quite a thin line to tread, and the slight differences between an "employee" and a "worker" make it quite easy to confuse the two. However, misclassification carries hefty fines, so make sure you avoid workforce misclassification and maintain compliance as best you can!
The UK offers several legal protections for employees working in or for a British company. Alongside these legal protections, the UK government have put to paper a number of statutory benefits that all British companies have to offer to their employees as part of their employment packages. Statutory benefits are also known as “mandatory benefits”, and any company that avoids offering these benefits are subject to penalties from the government and is at risk of lawsuits.
With that said, here is a list of mandatory benefits in the UK that every company must offer their employees:
Maternity pay is one of the many benefits that employees can enjoy, but workers cannot. Regardless of the length of time that an employee has spent working for a company, if they are pregnant and employed, they are eligible for a full year's worth of paid leave to care for themselves and their newly born child. This includes both the standard amount of maternity leave of 26 weeks as well as any additional maternity leave (also 26 weeks). The full 56 weeks isn’t mandatory, but new mothers have to take at least the first two weeks of leave, starting from when the baby is born.
Pregnant employees who decide to take maternity leave are also entitled to statutory maternity pay, although they need to first inform their employer with 28 days' notice when they want the maternity pay period to start. This is paid up for up to 39 weeks of the total 52 weeks and allows employees to continue earning up to 90% of their weekly earnings before tax. Maternity pay works in the same way as regular wages and, therefore, are still subject to tax and National Insurance deductions.
Employees who become pregnant have a variety of rights and protections during this time period. Companies are not allowed to fire employees on the basis of being pregnant, thanks to anti-discrimination laws, and maternity leave is considered separate from statutory holiday periods and sick leave in the eyes of the law. These employees also have the ability to request that their employer provides flexible working arrangements in the event that they choose to return to work after taking maternity leave.
In today’s modern world, more and more countries are acknowledging the importance of the presence of a father during the first years of a child’s life. The UK has made it into law that fathers are entitled to time off from work to take care of their newly born children, even if their partner or wife is also on maternity leave. This mandatory benefit is only given to employees, not workers.
However, fathers aren’t entitled to as much leave as mothers. Statutory paternity leave covers the father’s absence from work for up to 2 weeks – subject to the agreement between the employee and their employer. Fathers need to give employers 28 days' notice of when they want to start paternity leave and determine whether they’re eligible for paternity pay. These employees are also entitled to the same protections as those who take maternity leave.
There is no additional benefit to taking maternity or paternity leave together with shared parental leave, although many families do it nevertheless. The total amount of time off that can be split between parents is 50 weeks, with up to 37 of those weeks being compensated. While parents are not required to take their shared parental leave at the same time or even in succession, they are required to spend their leave time within the first year of their child's birth.
All workers are entitled to annual leave in the UK – so this covers both “employee” and “worker” employment statuses. In the UK, they are entitled to a minimum of 20 days of paid days plus eight days of paid bank holidays (or public holidays) per year – making it a total of 28 days minimum annual holiday covered under UK labour law. However, Northern Ireland has a slight distinction in its labour law as it covers an additional two public holidays, making it a total of 10 paid holidays – but the overall total for annual leave still is 28 days.
However, companies do not necessarily have to include bank or public holidays as paid leave. Bank and public holidays may be counted toward an employee's legally required vacation time if their employer so chooses. However, 28 days of leave is still the minimum legal requirement.
In the UK, only employees are entitled to sick leave and pay. Under UK labour law, employees can take up to 7 days off of work and still be entitled to pay. Sick leave is still possible after taking the 7 days, but employees must provide their employer with proof in the form of a “fit note” or a “sick note”. These are obtained from the GP or a hospital and detail the reason why an employee is not fit for work.
GPs are also able to provide a sick note that declares the employee “may be fit for work”, meaning that an employee might still be able to work if certain conditions are met. In this case, employers need to discuss with the employee what could be done to help facilitate the employee returning to work – such as different work hours or work-from-home options. If an agreement cannot be reached, then the employer must deem the employee as “not fit for work”.
Statutory sick pay can be paid by an employer for up to 28 weeks. Employees are entitled to a minimum of £99.35 per week if they are able to prove that they’re unable to work during this time. However, companies are free to offer more sick pay when agreed beforehand, before signing an employment contract.
In the UK, pensions are legally required to be provided by an employer and are regulated by law. To be in compliance with the law, businesses are required to automatically enrol their employees in a suitable pension plan. With the advent of pension auto-enrolment, businesses are compelled to make at least some pension contributions on their employees' behalf.
Currently, the required minimum contribution to occupational pension plans is 8% of “qualified earnings”, as defined in the relevant laws. Employers should contribute at least 3% of this amount while the rest is paid by the employee. Nonetheless, pensions are highly valued in the UK, and many companies offer substantial increases in their contributions over the bare requirement.
On top of the statutory benefits mentioned above, companies are free to offer some of their own benefits as a part of their employment package. Supplementary benefits are totally optional and can be given at the discretion of the employer before an employment contract is signed. Additional benefits are a great way to attract top talents into your workforce and are doubly as important to keep them around.
Small- to medium-sized companies can offer these additional benefits with the help of an experienced Employer of Record company to handle onboarding tasks. Here are some of the most sought-after supplementary benefits in the UK that companies should consider offering:
In a company with an employee share scheme, workers are either automatically given or given the option to purchase shares of the company upon employment. Alternative names for this programme include a stock option or equity plan for employees, as well as a share purchase plan. Companies often use share plans as a means of staff recruitment, retention, and motivation. They also serve to bring about a convergence of employee and shareholder interests.
Some companies have started to offer life insurance to their employees as a supplementary benefit. If the loss of a key employee would have a devastating financial impact on a company, that company may choose to purchase life insurance to compensate for the financial shortfall suffered after their passing. When you buy a policy like this, you are essentially buying insurance on the life of your employee.
If an employee were to pass away, his or her beneficiaries would get the life insurance payout. Families can use the money for a variety of things, including paying off debts and covering final costs like mortgage or rent, paying for a child's education, and paying for basic necessities.
A by-product of the pandemic that had raged our planet for nearly three years is the rapid adaptation of the “working from home” model. Even before the events of the early 2020s, the “digital nomad lifestyle” was becoming increasingly popular. And now, although a majority of people have been made to work from the office once more, hybrid and fully-remote working models are fast becoming the norm. What company wouldn’t want to put it on the table, with all the benefits that working remotely has proven to offer?
Flexibility in remote work arrangements can be beneficial for both parties involved in a number of ways, including increased productivity, enhanced work-life balance, and cost savings. Plus, thanks to the normalisation of solutions like Slack, Trello and Zoom, communication can become a lot more efficient through the remote working model. Some businesses, like the fintech company Revolut, even allow employees to work from anywhere in the world!
In the UK, businesses are only allowed to work employees and workers for a legal maximum of 48 hours a week, on average. However, there will be times where the business requires a specific employee to work a bit more than that maximum time – for example, if the company needs that employee’s specific skillset to solve a problem. Because overtime is not a mandatory benefit, this is where companies can offer overtime pay into their benefit plans to attract talent.
Overtime pay actually benefits both the company and the employee or worker. For one, it gives employers the ability to quickly adjust to short-term variations in workload or personnel levels while only having to pay for the time that is actually required. Because many workers enjoy the additional pay that overtime provides, the company’s ability to compete favourably in the regional labour market can also be improved as a result of this.
A great working benefit to offer employees is an income protection plan. If an employee has an injury or sickness that prevents them from working, income protection insurance will continue to make payments to them on a regular basis to replace a portion of their lost income. It will continue to provide payments until the employee is able to return to work, or until they reach retirement age, pass away, or the end of the policy term, whichever comes first.
A company’s workforce is the life and blood of its business, without them, the company may not survive! Businesses who offer income protection plans in their employment packages make it known that they value their employees. As an effect, offering this benefit doesn’t only give employees peace of mind but it also makes them feel more appreciated, which leads to increased employee loyalty and retention.
Working benefits in the UK are systems put in place to ensure that the British workforce can be comfortable as they commit their time and energy to the economic cycle. Those who are classed as employees or workers in the UK can enjoy a slew of benefits provided to them by their employer, although employees are offered more benefits for their full-time commitment. From paid time off to a pension plan, the UK government has put into law that companies must offer these benefits at the bare minimum.
As times have changed and needs have evolved, companies can offer a range of supplementary benefits to keep them competitive, and to help attract and maintain top talent. However, these great benefits aren’t just offered by big companies, small- to medium-sized businesses who partner with a global outsourcing company will be able to maintain their competitive advantage by offering their workforce some great benefits – all while maintaining compliance.