UK Employment Law explained

UK Employment Law for International Employers: The Full Guide

So you want to hire someone in the United Kingdom. Maybe you've found the perfect candidate in London, or your engineering lead wants to bring on a remote developer based in Manchester. Whatever the case, you've quickly realised something: UK employment law is not something you can figure out over a weekend.

And that's fair enough. The UK has one of the most developed employment law frameworks in the world. It protects workers heavily, and it expects employers to follow the rules to the letter. Get it wrong, and you're looking at employment tribunal claims, financial penalties, and reputational damage.

But here's the good news. Once you understand the structure, it's not as intimidating as it first appears.

This guide walks you through everything an international employer needs to know about UK employment law, from the key statutes to the practical steps you need to take before your first hire starts work.

If you'd rather skip the complexity entirely, an Employer of Record (EOR) can handle all of this for you. But even if you go down that route, understanding the landscape will help you ask the right questions and make better decisions.

What Is UK Employment Law and Why Does It Matter for International Employers?

UK employment law is the body of legislation, regulations, and case law that governs the relationship between employers and workers in the United Kingdom. It covers everything from the written terms of an employment contract to the minimum someone must be paid, how many hours they can work, and what happens when the relationship ends.

For international employers, this matters because the UK system is fundamentally different from many other countries. There is no "at-will" employment like you find in most US states. Workers gain rights from day one, and some of the strongest protections kick in after just two years of continuous service. If you're coming from a jurisdiction where employment relationships are more flexible, you'll need to adjust your expectations.

The UK framework is built on a combination of Acts of Parliament, statutory instruments, and decisions from employment tribunals and higher courts. Parliament is sovereign in the UK, which means legislation sits at the top of the hierarchy. Case law interprets and applies that legislation in real situations.

What makes the UK particularly interesting right now is the Employment Rights Act 2025, which received Royal Assent on 18 December 2025 and is being phased in through 2026 and 2027. This is the most significant shake-up of UK employment law in decades, and it changes the game for employers in several important ways. We'll cover those changes in detail later in this guide.

For now, the key takeaway is this: if you're employing someone in the UK, UK law applies. It does not matter where your company is headquartered. It does not matter what your home country's employment laws say. The location of the worker is what counts.

What Are the Five Key UK Employment Statutes?

If you're going to understand UK employment law, you need to know the five Acts of Parliament that form its backbone. These are the statutes that come up again and again in every HR decision, every contract negotiation, and every tribunal claim.

1. Employment Rights Act 1996 (ERA 1996)

This is the big one. The Employment Rights Act 1996 is the foundation of individual employment rights in the UK. It covers:

• The right to a written statement of employment particulars (essentially, the employment contract)
• Protection from unfair dismissal
• Rights around redundancy payments
• Maternity, paternity, adoption, and shared parental leave
• Protection against unlawful deduction from wages
• Whistleblower protections

Most of the day-to-day employment rights you need to comply with trace back to this Act. When someone talks about "unfair dismissal" in the UK, they're talking about ERA 1996.

2. Equality Act 2010 (EA 2010)

The Equality Act 2010 consolidated over 100 separate pieces of anti-discrimination legislation into one statute. It protects workers from discrimination based on nine protected characteristics:

• Age
• Disability
• Gender reassignment
• Marriage and civil partnership
• Pregnancy and maternity
• Race
• Religion or belief
• Sex
• Sexual orientation

This Act applies from the very start of the employment relationship, including during recruitment. If you advertise a job in the UK, you're already subject to the Equality Act.

3. Working Time Regulations 1998 (WTR 1998)

Born out of an EU Directive (and retained in UK law after Brexit), the Working Time Regulations 1998 set the rules around working hours and rest periods.

Key provisions include:

• A maximum average working week of 48 hours (workers can opt out voluntarily)
• A minimum of 28 days' paid annual leave per year (including bank holidays)
• Rest breaks during shifts
• Minimum rest periods between shifts
• Special protections for night workers

4. National Minimum Wage Act 1998 (NMWA 1998)

This Act establishes the legal minimum pay rates for workers in the UK. The rates are reviewed annually and, as of April 2025, are:

• National Living Wage (age 21 and over): £12.71 per hour
• 18-20 rate: £10.85 per hour
• Under 18 rate: £8.00 per hour
• Apprentice rate: £8.00 per hour

The penalties for underpaying are severe. HMRC can issue financial penalties of up to 200% of the underpayment, and employers can be publicly named and shamed.

5. Pensions Act 2008

The Pensions Act 2008 introduced automatic enrolment for workplace pensions. Every employer in the UK must:

• Automatically enrol eligible workers into a qualifying pension scheme
• Make employer contributions (minimum3% of qualifying earnings)
• Enrol workers from their first day of employment (under the new ERA2025 rules)

This is not optional. The Pensions Regulator enforces compliance, and penalties for non-compliance can be substantial.

What Are Your Obligations as an Employer in the UK?

Once you employ someone in the UK, you take on a range of legal obligations. Some kick in before the worker even starts. Others are ongoing. Here's a practical breakdown.

Before Employment Begins

Right to work checks. You must verify that every employee has the legal right to work in the UK before they start. This means checking original documents (passport, visa, biometric residence permit) against Home Office guidance. Get this wrong, and you face civil penalties of up to £60,000 per illegal worker under the Immigration, Asylum and Nationality Act 2006. Our guide on right to work checks in the UK walks through the process in detail.

DBS checks. For certain roles (working with children, vulnerable adults, or in regulated sectors), you may need to request a Disclosure and Barring Service check. You can only request these where the role is eligible; you cannot blanket-check all employees.

Employment contract. You must provide a written statement of employment particulars on or before the first day of employment. Under the ERA 2025 changes, this is now a day-one right (previously, employers had two months). The statement must include the terms we cover in our UK employment contracts guide.

During Employment

Payroll and tax. You must operate PAYE (Pay As You Earn) and deduct income tax and National Insurance contributions from every pay packet. You report this to HMRC in real time through the Full Payment Submission (FPS). Our PAYE explained guide and National Insurance guide cover these obligations in detail.

Holiday and leave. Workers are entitled to a minimum of 28 days' paid annual leave. They also have rights to maternity leave, paternity leave, adoption leave, shared parental leave, and statutory sick pay. The specifics of each are set out in the ERA 1996 and related regulations.

Working hours. Unless a worker has opted out, you must ensure they do not exceed an average of 48 hours per week over a 17-week reference period. You must also provide rest breaks and maintain records of working time.

Pension auto-enrolment. From day one of employment, you must assess eligible workers and automatically enrol them into a qualifying workplace pension scheme. You make minimum contributions of 3% and the worker contributes 5% (with tax relief).

Health and safety. Under the Health and Safety at Work etc. Act 1974, you have a duty to ensure, so far as is reasonably practicable, the health, safety, and welfare of your employees. For remote workers, this extends to their home working environment.

Data protection. The UK General Data Protection Regulation (UK GDPR) and the Data Protection Act 2018 govern how you handle employee personal data. You need a lawful basis for processing, you must provide a privacy notice, and you must handle subject access requests properly.

When Employment Ends

How employment ends depends on the circumstances. You can end employment through:

• Resignation (the employee leaves voluntarily)
• Dismissal (you terminate the employment)
• Redundancy (the role is no longer needed)
• Mutual agreement

In almost all cases, the employee is entitled to a notice period. The statutory minimums are set out in ERA 1996 and depend on length of service:

• Less than one month: no notice required; one month to two years: one week's notice
• Two to twelve years: one week per year of service
• Twelve or more years: twelve weeks' notice

Your contract can provide for longer notice periods, but never shorter than the statutory minimum. For a detailed breakdown, see our guide on UK termination and dismissal.

What Should a UK Employment Contract Include?

Since the ERA 2025 changes, employers must provide a written statement of employment particulars on or before the first day of employment. This is a day-one right with no exceptions.

The statement must include, at a minimum:

• The names of the employer and employee
• The date employment begins
• The job title or description
• The place of work
• Pay and payment intervals
• Hours of work and days of the week
• Holiday entitlement and public holidays
• Sick pay provisions
• Notice periods
• Pension arrangements
• Disciplinary and grievance procedures
• Any training requirements

Many employers choose to provide a full employment contract rather than just the minimum written statement. A proper contract can include additional terms around confidentiality, intellectual property, restrictive covenants, and bonus schemes. Our UK employment contracts guide has templates and detailed advice.

One important note for international employers: UK courts and tribunals interpret contracts in the context of UK law. You cannot contract out of statutory rights. If a term in your contract contradicts a statutory right, the statutory right wins.

How Does Pay, Tax, and National Insurance Work in the UK?

This is where many international employers stumble. The UK tax system is administered by HMRC (His Majesty's Revenue and Customs), and it is rigorous.

PAYE (Pay As You Earn)

Every employer must operate PAYE. This means you calculate and deduct income tax and employee National Insurance contributions from each pay packet, and you pay employer National Insurance contributions on top. You report this to HMRC through the Real Time Information (RTI) system, submitting a Full Payment Submission (FPS) every time you pay employees.

Our PAYE explained guide covers the mechanics in detail, and our National Insurance guide breaks down the contribution rates.

Income Tax

The UK operates a progressive income tax system. For the 2025/26 tax year (which runs from 6 April to 5 April), the bands for England, Wales, and Northern Ireland are:

Scotland has its own set of bands, which are slightly different. If your employee is a Scottish taxpayer, the rates vary.

Each employee has a tax code, issued by HMRC, which tells you how much tax-free pay they're entitled to. The most common code for 2025/26 is 1257L, which corresponds to the standard Personal Allowance of £12,570.

National Insurance Contributions (NICs)

NICs fund the UK's social security system. Both the employer and the employee pay:

• Employee NICs: 8% on earnings between £12,570 and £50,270, plus 2% on earnings above £50,270
• Employer NICs: 15% on earnings above £5,000 per year (the Secondary Threshold)

The employer NIC is an additional cost on top of the employee's salary. Many international employers are surprised by this, so factor it into your budget.

Statutory Payments

From your payroll, you may also need to make statutory payments including:

• Statutory Sick Pay (SSP): £123.25 per week (or 80% of average weekly earnings, if lower), payable from the first day of sickness from 6 April 2026, for up to 28 weeks
• Statutory Maternity Pay (SMP): 90% of average weekly earnings for the first 6 weeks, then £194.32 per week (or 90% if lower) for 33 weeks (2026/27)
• Statutory Paternity Pay (SPP): £194.32 per week (or 90% of average weekly earnings, whichever is lower) for up to 2 weeks (2026/27)

You can reclaim most of these from HMRC, but you need to manage the cash flow in the meantime.

What Are the Rules on Working Hours and Holiday?

The Working Time Regulations 1998 set clear boundaries on working time. Here's what you need to know.

Maximum Working Hours

The default maximum is an average of 48 hours per week, calculated over a 17-week reference period. Workers can voluntarily opt out of this limit by signing a written opt-out agreement. However, you cannot pressure them to do so, and they can withdraw their opt-out with seven days' notice.

Rest Breaks

Workers are entitled to:

• A 20-minute break if their shift is longer than 6 hours
• At least 11 consecutive hours of rest between shifts
• At least 24 hours of uninterrupted rest per week (or 48 hours per fortnight)

Annual Leave

The statutory minimum is 5.6 weeks (28 days) of paid annual leave per year for full-time workers. This includes bank holidays. Part-time workers get a pro-rata entitlement.

Some employers offer more than the statutory minimum, but you cannot offer less. Holiday entitlement continues to accrue during maternity leave, sick leave, and other statutory leave.

The rules around holiday pay have changed in recent years. For workers with variable pay, holiday pay is based on average earnings over a 52-week reference period; workers with fixed pay receive their normal weekly pay. For leave years starting on or after 1 April 2024, rolled-up holiday pay is permitted for irregular-hours and part-year workers.

Our UK holiday entitlement guide covers the calculations and rules in detail.

How Does Dismissal and Termination Work in the UK?

This is one of the areas where UK law differs most from other jurisdictions. You cannot simply decide to let someone go. There is a process, and failing to follow it can be expensive.

Unfair Dismissal

Under the ERA 1996, employees have the right not to be unfairly dismissed. The key change under the ERA 2025 is that the qualifying period falls from two years' continuous service to six months, from 1 January 2027.

Potentially fair reasons for dismissal include:

• Conduct
• Redundancy
• Statutory restriction (for example, losing the right to work in the UK)
• Some other substantial reason

Even with a fair reason, you must follow a fair procedure. This typically involves investigation, a hearing, the right to be accompanied, and the right to appeal. ACAS (the Advisory, Conciliation and Arbitration Service) publishes a Code of Practice on disciplinary and grievance procedures that tribunals expect you to follow.

Constructive Dismissal

If you fundamentally breach the contract of employment (for example, by significantly reducing pay without consent or creating a hostile working environment), the employee may resign and claim constructive dismissal. This is treated as a dismissal in law.

Redundancy

Redundancy is a fair reason for dismissal, but you must follow a fair selection process. If you are making 20 or more redundancies within a 90-day period, you must also consult collectively with employee representatives, which involves specific notification and timing requirements under the Trade Union and Labour Relations (Consolidation) Act 1992.

Employees with at least two years' service are entitled to a statutory redundancy payment, calculated based on age, length of service, and weekly pay (capped at a statutory maximum).

Our UK termination and dismissal guide has detailed advice on getting this right.

What Is Employment Status and Why Does It Matter?

In the UK, a person's employment status determines which rights and protections they're entitled to. There are three categories:

• Employee: Full statutory rights, including unfair dismissal protection, redundancy pay, and all family leave entitlements
• Worker: A middle category with rights to the minimum wage, holiday pay, sick pay, and pension auto-enrolment, but not unfair dismissal or redundancy pay
• Self-employed: Fewest protections; essentially a business-to-business relationship

Getting employment status wrong is one of the biggest risks for international employers. If you engage someone as a contractor but treat them like an employee (controlling how, when, and where they work), a tribunal can reclassify them as an employee, with all the backdated rights that entails.

This is where IR35 comes in. IR35 is the UK's off-payroll working rules, designed to prevent people from avoiding employee-level taxation by working through an intermediary (usually a personal service company). Since April 2021, medium and large private-sector employers are responsible for determining whether a contractor is "inside" or "outside" IR35. If inside, you must deduct tax and NICs as if they were an employee.

These changes are being phased in through 2025 and 2026, with some provisions already in effect and others awaiting secondary legislation. Staying on top of the implementation timeline is essential for compliance.

How Does an Employer of Record Handle UK Employment Law Compliance?

Here's where things get practical. If you've read this far and you're feeling overwhelmed, that's a normal reaction. UK employment law is detailed, it changes regularly, and the penalties for getting it wrong are real.

A UK Employer of Record (EOR) solves this problem by employing your UK workers on your behalf. The EOR is the legal employer in the UK, which means:

• The EOR operates PAYE, deducts tax and NICs, and reports to HMRC through RTI
• The EOR enrols workers in a qualifying pension scheme from day one
• The EOR manages statutory payments (SSP, SMP, SPP)
• The EOR handles right to work checks and DBS checks where applicable
• The EOR ensures compliance with the Working Time Regulations
• The EOR manages termination processes in line with UK law

You still manage the worker's day-to-day role, performance, and development. The EOR handles the legal employment framework.

This is particularly valuable for international employers who don't have a UK entity. Setting up a UK subsidiary is expensive and time-consuming. An EOR lets you hire in the UK within days, not months.

The cost of an EOR is typically a monthly fee per employee, which varies depending on the provider and the seniority of the role. Our EOR cost guide breaks down what to expect.