Termination in United Kingdom - DLA Piper Guide to Going Global

Legal system, currency, language

Common law. The official currency is the pound sterling (GBP). The UK left the European Union (EU) on January 31, 2020; however, the UK's exit was followed by a transition period during which the UK was still subject to EU rules. The transition period ended on December 31, 2020. However, while there is now no freedom of movement of workers between the UK and the EU, there is little short term impact on employment laws which will continue to apply until UK legislators seek to make changes – which, under the terms of the Trade and Cooperation Agreement agreed between the UK and EU, are only permitted if they do not impact on trade or investment. Under new legislation, the government has wide-ranging powers to revoke or restate EU law. Currently the government is proposing to restate principles of EU case law mainly in relation to discrimination and equal pay, and to make changes to EU-derived law on working time and business transfers.

The official language is English.

Corporate presence requirements & payroll set-up

A foreign entity may engage in the UK with proper payroll registrations, subject to business and corporate tax planning considerations. Withholdings for pay-as-you-earn (eg, social charges – up to 13.8 percent for the employer portion and 10 percent for the employee portion up to a certain threshold and 2 percent thereafter) and income tax (up to 45 percent) to be done through payroll. Self-employed independent contractors are paid gross and are responsible for their own taxation.

Pre-hire checks

Required

Immigration compliance. For certain limited occupations (eg, solicitors, chartered accountants, certain roles working with children or vulnerable adults), a criminal records check.

Permissible

Criminal and credit reference checks are only permissible for specific roles (eg, certain finance positions) and are subject to proportionality requirements. Reference and education checks are common and permissible with applicant consent.

Immigration

The UK left the EU on January 31, 2020, but was subject to a transition period between February 1, 2020 and December 31, 2020.

Until December 31, 2020, nationals of the European Economic Area (EEA) and Switzerland had the right to work in the UK. EU nationals who were already resident in the UK by December 31, 2020, are now able to stay in the UK indefinitely provided they have applied for either pre-settled or settled status under the EU Settlement Scheme (EUSS). The deadline for doing this was June 30, 2021. Otherwise, EU nationals who do not qualify for a status under the EUSS as well as all non-EU nationals are now subject to a new immigration system which requires sponsorship by an employer in order to be able to work in the UK.

Hiring options

Employee

Indefinite, fixed-term, full-time or part-time. Part-time workers and fixed-term employees have the right not to be discriminated against on the basis of their employment status.

Independent contractor

Independent contractors may be engaged directly by the company or via a personal services company. Engagement may be subject to misclassification exposure, whether as an employee or worker.

Workers

A "worker" has fewer rights than an employee but more than an independent contractor. A worker works under a contract for personal service (ie, they cannot send a substitute) with another party whose status is not one of customer or client to the individual.

Agency worker

Agency workers are common and are typically either employees or workers. Agency workers have the right to equal treatment to employees in relation to pay and other benefits terms after a 12-week qualifying period.

Employment contracts & policies

Employment contracts

Common best practice. Employers are required to provide detailed information on employment terms to both new employees and workers from day 1 of employment.

Probationary periods

Permissible. No statutory limit, but 3 to 6 months is common.

Policies

A written health and safety policy and disciplinary and grievance policy are mandatory. The latter must be referenced in the contract of employment.

Third-party approval

No requirement to lodge employment contract or policies with, or get approval from, any third party.

Language requirements

No statutory requirements, but all documents should be in English.

Working time, time off work & minimum wage

Employees entitled to minimum employment rights

All.

Working hours

48 hours per week limit on working time; opt-out possible. Rules on rest breaks, night work and rest periods between shifts.

Overtime

No obligation to provide pay for overtime worked as long as pay overall does not fall below the statutory minimum.

Wages

	Minimum Wage Rate as of April 2024 (GBP)	Current Minimum Wage R of April 2023 (GBP)
23 years old or over	11.44	10.42
21 - 22 years old	11.44	10.18
18 - 20 years old	8.60	7.49
16 -17 years old	6.40	5.28
Apprentices	6.40	5.28

Vacation

5.6 weeks' vacation per year (which includes 8 public holidays). There was an additional 9th public holiday in 2023.

Sick leave & pay

No right to take time off for sick leave, but most contracts allow this. Employees are entitled to receive 28 weeks' statutory sick pay at GBP109.40 per week, which will rise to GBP116.75 in April 2024 and is generally funded by the employer.

Maternity/parental leave & pay

52 weeks of maternity leave, paid for 39 weeks (ie, 90 percent of pay for first 6 weeks, then the statutory rate of GBP172.48 per week, rising to GBP184.03 in April 2024), and right to return to work. 2 weeks of paternity leave at birth, paid at the statutory rate subject to eligibility requirements. Parents may take 18 weeks of unpaid parental leave at any time until the child is 18. Same rights for adopting parents. Subject to eligibility, a mother may also end maternity leave after 2 weeks and share the remaining 50 weeks of parental leave with the other parent (paid at the statutory rate, if eligible).

Other leave/time off work

Employees may also be entitled to paid or unpaid leave for other purposes such as parental bereavement, carer’s leave (from April 1, 2024) jury service, care for dependents in an emergency and workplace representative duties.

Discrimination & harassment

Direct and indirect discrimination is prohibited, along with victimization and harassment. Employers are under a duty to make reasonable adjustments for persons with disabilities.

Characteristics protected from unlawful discrimination and harassment: age, disability, gender reassignment, marriage or civil partnership, pregnancy or maternity, race, religion or belief, sex or sexual orientation. Employers must take reasonable steps to prevent workplace harassment.

Whistleblowing

Employees are protected from being dismissed, and employees and workers are protected from being subjected to a detriment because they made a protected disclosure. Disclosures qualify for protection if they are a disclosure of information that, in the reasonable belief of the worker, tends to show that 1 of following has occurred, is occurring, or is likely to occur:

A criminal offense
Breach of any legal obligation
Miscarriage of justice
Danger to the health and safety of any individual
Damage to the environment
The deliberate concealing of information about any of the above

The worker must also reasonably believe that the disclosure is in the public interest.

The legislation encourages disclosure to the employer as the primary method of whistleblowing. However, disclosures to external parties are also protected in some circumstances.

Benefits & pensions

Currently, no benefits required above those covered under social insurance contributions.

There is a state pension system provided by the government with eligibility determined by the national insurance contributions that have been paid or credited. Employers are required to automatically enroll eligible workers into a pension scheme and pay minimum contributions. Workers who are automatically enrolled have a right to opt out of the scheme.

Data privacy

The UK is subject to the UK General Data Protection Regulation (UK GDPR) and the Data Protection Act 2018, which impose significant obligations and onerous sanctions for employers. Under this regime, it is extremely difficult for employers to rely on consent as a basis for processing employee data, and other legitimate grounds generally must be identified.

Rules in transactions/business transfers

Automatic transfer under the UK's Transfer of Undertakings (Protection of Employment) Regulations (TUPE) in a business sale or service provision change. Significant restrictions on changing terms and conditions following a transfer. Duty to inform and consult with employee representatives. Any dismissal connected to the transfer would be unfair unless for an economic, technical or organizational reason.

Employee representation

Trade unions are prevalent in certain sectors (eg, manufacturing, transport and the public sector). Approximately 25 percent of workers are members, but most are employed in the public sector. Many businesses have no union or other worker representation. Works councils are uncommon. Industry-level collective bargaining agreements are uncommon.

Termination

Grounds

Termination is permissible, if a fair process has been followed, on the following grounds only: misconduct, capability (including performance and ill-health), redundancy, illegality and "some other substantial reason of a kind to justify dismissal."

Employees subject to termination laws

Employees with fewer than 2 years' seniority have no unfair dismissal protection, save in certain circumstances where no seniority is required, including dismissals for whistleblowing, connected to family/pregnancy rights, trade union membership and activities, among others.

Restricted or prohibited terminations

No statutory prohibitions.

Third-party approval for termination/termination documents

Not required.

Mass layoff rules

Strict information and consultation rules apply where 20 or more employees are to be made redundant within 90 days or less. The employer must also notify the Secretary of State of the redundancies. Failure to do so is a criminal offense.

Notice

No notice required in the first month of employment. After this, 1 week’s notice per complete year of service, up to 12 weeks. May be required to give longer notice, if reasonable. Not required for terminations for gross (ie, extremely serious) misconduct. Longer notice may be agreed upon and set out in the contract of employment.

Statutory right to pay in lieu of notice or garden leave

No. Entitlement depends on contract terms.

Severance

Payable to redundant employees with 2 years' seniority only: 1/2 week's pay per year of service, for service under age 22; 1 week's pay per year of service, for service aged 22 to 40; and 1.5 week's pay per year of service, for service age 41 and above. Pay capped at GBP544 per week. The rate will increase in April 2023. More generous terms are possible.

Post-termination restraints

Considered to be in restraint of trade and void. However, those that protect the employer's legitimate business interests may be enforced if reasonable. Must be tailored for the specific business and the risks posed by the employee. Garden leave is common for senior employees.

Non-competes

Permissible in narrow, justifiable circumstances. Typically no longer than 3 to 6 (maximum of 12) months, depending on the circumstances.

Customer non-solicits

Permissible in specific circumstances. Typically no longer than 3 to 6 (maximum of 12) months, depending on the circumstances.

Employee non-solicits

Permissible. Length of restriction will depend on the circumstances.

Waivers

Enforceable, but employees must be represented by counsel to sign a settlement agreement waiving statutory rights. Note that a waiver of contractual and common law rights is possible without formalities.

Remedies

Discrimination

Uncapped compensation, based on the claimant's financial loss plus injury-to-feelings compensation of between GBP600 and 33,000.

It is additionally possible to claim a declaration of rights or a recommendation, aimed at reducing the impact of discrimination.

Unfair dismissal

Basic award, based on claimant's age and length of service (currently capped at GBP19,290) plus compensation based on the claimant's financial loss (currently capped at GBP105,707) or 52 weeks' pay – whichever is lower). The cap is expected to increase in April 2024. In exceptional cases (eg, whistleblowing dismissals), compensation is uncapped.

Reinstatement or reengagement is possible but rare.

It is possible for the tribunal to award a payment for "aggravating features" of between GBP100 and GBP20,000. This is paid to the government.

Failure to inform & consult

Redundancy: up to 90 days' gross pay. TUPE: up to 13 weeks' gross pay.

Criminal sanctions

Failure to notify the Secretary of State about mass layoffs is a criminal offense. Prosecution is fairly rare, but there has been an upward trend in prosecutions in recent years.

During the COVID-19 pandemic a number of criminal offenses were introduced, primarily in relation to self-isolation obligations and the wearing of face coverings. These are no longer in force.

Key contacts

Jane Hannon

Partner DLA Piper UK LLP [email protected] T +44 113 369 2512 View bio