Employment in United Kingdom(UK)

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The UK is one of the top choices for business owners to establish their business. If you are wondering how to start a business in the UK, here is everything you need to know about establishing a business in the United Kingdom.
The United Kingdom has put into place a lot of regulations and policies, including very specific labor laws that all business owners must follow when starting a new venture. Given its many policies that benefit both the employer and the employees, it is no wonder that this place attracts many entrepreneurs and investors.
Before you start thinking about starting a business in UK, the first and foremost thing to consider is what your business is going to be? Is there a market for the product or service that you are selling? If so, how much can you expand? How much can you put into your business? Would you need to hire people as you start, and can you pay them at least the minimum wage? Can you start a business with no money in UK? These factors are extremely important to consider when looking to start a business venture in the United Kingdom.

Quick Overview

The United Kingdom is a diverse country where people from different parts of the world come to make their homes and start their careers. If you too, aspire to start your company in this country that offers fair and equal opportunities, you need to be aware of all the important regulations and policies that will govern your business’s establishment and workings. Whether it is policies to start your business, hire employees, conduct business, pay taxes, or even resolve insolvency, the following regulations, policies, and customs are crucial to be known to and implemented by all business owners and investors.

Process of setting up a business in UK

When starting a business, one needs to do more than just come up with an idea and a business name. A whole procedure must be followed to the T for starting a business in the UK efficiently and legally. If you are trying to learn how to start a business in the UK, complete these processes:

  • Make a business plan: Create a realistic business plan which outlines your goals, plans on starting, and milestones you hope to achieve in a certain timeline. Research about the industry you pick and look at the demand. Objectively gauge your ability to meet this demand and use this objectivity to create an aspirational plan yet realistic.
  • Register your company: To register your company, you need to figure out three important things: what your business is, the name of your company, and what kind of company you are starting. The UK recognizes three kinds of companies: Sole Trader, Limited Company and Partnership.
  • A Sole Trader Company consists of just one owner. This individual is responsible for all obligations of the business, including debts.
  • A Partnership consists of two or more people or businesses who are equally responsible for all obligations, including accounting obligations of the company.
  • A Limited Company is one where the company’s finances are separate from the personal finances of the owner or partners.

After coming up with a name and figuring out the kind of company you are creating, it is essential to get the business registered to ensure that no one else gets the name you picked and, more importantly, start further functions.

  • Permits: Depending upon your type of business and your citizenship status, every business owner would have to get several permits and licenses. Foreign nationals would have to also procure the correct visa/ green card to get a work permit before proceeding with business establishment. The licenses may be general, mandatory for all businesses by law, or specific to your particular business. For example, businesses dealing with food and beverages would have to get special checks, permits, and licenses for making and selling food products. General licenses include insurance, tax registration, and other similar permits.
  • Hiring Employees: the UK has extensive labor laws, wage laws, and other employment laws for both full-time and part-time workers (including independent contractors). Employers must be aware of these laws and regulations before looking for employees. UK laws require employers to go through a proper hiring procedure, including interviews, offers, acceptance, and creating a contract of employment. Employers must ensure they follow all protocols for the same. When hiring employees, new businesses must ensure that they have enough funds to cover the hiring costs of every employee. You can always expand your team as you grow and manage their requirements efficiently with the help of experienced HR consultants like Zimyo.
  • Create Employment Contracts:  Employment contracts are essential for starting a business in the United Kingdom. The Employment Contracts need to be comprehensive and in keeping with the local laws applicable to businesses in the UK. The Employment Contract must cover everything related to an employee’s employment, including Wages, Leave allowances, A brief job description, working hours, working days, bonuses, duties, terms of termination, notice period, probationary period, etc.
  • Finding a Premises: Where you start your company plays an important role in its success. You need to find a market where your product and service are needed, and there are not as many providers of that service or product. Alternatively, if you are offering very competitive prices, you can also choose to start your business in a busy area where you will have a lot of competitors. The key is to understand your strengths and areas of improvement before finding the right place to start working.

Hiring Employees in the UK 

Here are some of the extremely important aspects related to hiring employees in the UK: –

  • Trial Period/Probation Period: Probation or trial period of work is not covered under United Kingdom’s statutory law. However, businesses have a probationary period between three to six months as a general standard. Three months probation period is less common and most available when individuals are changing departments within the same company.
  • Leave and Holidays: Leave and holidays come in various forms in UK Labour Laws. These are the categories of paid leave and holidays which every employer in the United Kingdom must mandatorily adhere to: –
  • Public Holidays: 8 public holidays are part of the paid leave breakup in the United Kingdom.
  • Vacation: Every full-time employee is allowed 5.6 weeks or 28 days’ worth of paid vacation days. Part-time employees too, are allowed 5.6 weeks’ worth of paid vacation time; however, the number of days is lesser for them (calculated on the number of working hours). Employees who cannot use these 28 days of vacation can be allowed to carry over a maximum of 8 holidays to the next year. For flexible work, the number of unused leaves is paid out at the end of the work.
  • Sick Leave: Employees who earn a minimum of 120 pounds per week in the United Kingdom are eligible to get 93.65 pounds per week for a maximum duration of 28 weeks in a year. This rule comes through the Statutory Sick Pay regulation. Those employees become eligible to gain this benefit who cannot work 4 consecutive days or more in a week. Employers, however, can opt to increase the sick pay in the form of occupational pay or contractual pay.
  • Maternity Leave: Maternity leave is statutorily made available for 52 weeks (26 weeks regular and 26 weeks additional); however, it is not necessary to use it all. Employers are needed to mandatorily allow 2 weeks of paid maternity leave after the child is born to the mothers for normal occupations and a minimum of 4 weeks of paid maternity leave after the child’s birth if the mother is working in a factory.

Fathers too get paternity leave of 2 weeks; however, they must take this leave in one stretch.

  • Termination of Services: Whether the employer is terminating an employee or an employee is resigning from a place of work, they must provide a notice period to the other party to inform them of the decision. The employer must provide adequate notice before terminating an employee. The notice period must be mentioned in the employment contract. If the number of days is less than the statutory notice period, the employer has to adhere to the statutory notice period. The statutory notice period for terminating an employee is one week for employees who have worked for at least one month and two years. Employees who have worked longer than two years would be given one additional week for each extra year, with a maximum of 12 weeks’ notice.

Employees must give at least one week’s notice to the employer, and there is no maximum limit; however, it is expected that they find an adequate duration depending upon how long they have worked.

  • Pension: Pensions go by various names in the UK, but essentially, a certain portion of an employee’s salary is put into a pension fund each time the salary is credited. Additionally, the employer may add some amount to that pension fund each time. When an employee retires and becomes eligible for a pension, they may claim tax relief if the employer has been depositing the pension amount before income tax deduction or when the tax rate is 20%. The pension provider can claim tax relief on the employee’s behalf.
  • Work Hour Norms: As per United Kingdom’s Employment Rights Act 1996, employees can only be hired to work a maximum of 40 hours per week for a 5-day duration. This holds especially true for companies that offer overtime. Companies that do not have overtime provisions can require the employees to work a maximum of 48 hours per week. Overtime may or may not be paid, as per the employer’s discretion. Employers are also not allowed to force employees to work overtime for more than 48 hours in 17 weeks.

How easy is it to conduct business in the UK?

  • Starting a Business: Starting a business in the UK is quite a straightforward process. However, it may take some time because of the various permits, licenses, and regulations that the business needs to comply with and gain. Various statutory laws govern several aspects of running a business in the UK. The UK has consistently ranked among the top 10 places for doing business. To put a score on it, the UK has received an overall score of 83.5.
  • Managing Permits: Every employer must register with the HMRC before starting a business in the UK. The HMRC is a tax system that must be used for all the tax-related components. Employers must also make sure to get Employers Liability Insurance. These registrations, along with other general and business-specific permits, must be attained before starting a business.
  • Getting Electricity: Getting electricity is where the UK has scored the highest when gauging the ease of conducting business. Electricity is essential for businesses. As such, the procedure to procure electricity and an ample amount of it needs to be simple.
  • Getting Credit: Getting credit is fairly easy in the UK. You need to approach the bank with all the required business documents, investment papers, registrations, insurance documents, permits to work, and a well-researched and practical business plan to attain credit.
  • Managing Payroll: To manage payroll, companies often hire an HR team or take help from other platforms. They may also hire temporary workers and contract workers to implement UK HR policies efficiently for your business.
  • Paying Taxes: For tax-paying purposes, all businesses must be registered with the HMRC or Her Majesty’s Revenue and Customs. Employers must deduct the taxes from the employee’s salaries and credit the payouts.
  • Enforcing Contracts: This is where the UK has ranked the least. Enforcing contracts becomes the work of the administrative team, and escalated issues can be taken up to court, which can be a lengthy procedure. Employers are often seen defying certain terms of the contracts, like providing the reason for termination within the stipulated time frame.
  • Resolving Insolvency: The insolvency laws have undergone a shift since the onset of the pandemic, which caused several businesses to close down. Insolvency can be resolved in the UK by selling off the company or declaring bankruptcy. Selling off to another company or individual is given preference over declaring bankruptcy. If the business can find someone willing to take over the business and liabilities, they must choose to do that.

On the face of it, looking after so many regulations, legalities, and policies may seem tiresome. However, entrepreneurs can always seek help from experts. Various platforms help streamline several processes, so you have one less thing to worry about. Simply having a little patience and maintaining consistency of effort can make the experience extremely rewarding and, ultimately, worthwhile. Starting a business in the UK may look difficult at first, but once you start the procedures, it will become easier.
Being a leading HR services provider in the UK, Zimyo offers a comprehensive range of services to manage your employees effectively, be it payroll management or availing advance against salary. This helps you focus on the business’s core operations and let the experts handle the human resources.