Employment Law for Small Business Owners UK

Employment Law for Small Business Owners UK

What a Small Business Owner Needs to Know about Employment Law in the UK

As a Small Business Owner, it is important that you are up-to-date with all your legal obligations to your employees. There are certain laws that you need to abide by to ensure that your employee’s rights are covered and hence avoid workplace disputes or claims. Here are some of the most important points that you need to consider when hiring employees in your business according to Employment Law in the UK.

Set up a Payroll

You will need to register as an employer with HMRC and receive PAYE registration details. This must be done before you produce your first pay slip to your first employee.

A payroll must be set up and pay slips must be produced for each employee. All pay slips must show employee’s earnings and deductions for Tax and National Insurance. You must report your payroll to HMRC.

PAYE Taxes, income tax and employee NI (National Insurance) that you owe on behalf of your employees must be paid to HMRC as well as that owed by your business. This can be done through a full payment submission (FPS). Note that there are certain aspects of PAYE taxes that can be reported through an Employer Payment Summary (EPS) as well.

Employers may be allowed, subject to conditions, employer NIC (National Insurance Contributions) allowance of up to £3000 which in effect will reduce an employer’s PAYE tax liability.

Contract of employment

Every employee should be given a contract of employment in writing specifying terms of employment, employee’s rights and obligations. A contract begins when the offer of employment is agreed upon and accepted by the employee. The terms of contract can be verbally agreed upon or in writing which is often the safest option. The right to change the terms of employment may be changed if you have reserved your rights as an employer or the employee has consented to these changes. Note that a probation period can be offered for 3-6 months (1 week for short-term contracts) after which a full employment offer can be given.

National Minimum wage

The National Minimum wage applies from 1 April 2017 and is classified as follows:

  • Workers aged 25 and over must be paid £7.50
  • Workers aged 21 to 25 must be paid £7.05 per hour
  • Workers aged 18 to 21 must be paid £5.60 per hour
  • Workers under 18 must be paid £4.05 per hour
  • Apprentices under 19 years old must be paid £3.50 per hour

Paid Holidays

Employees are entitled to at least 28 days of paid holiday per year. Part-time workers are entitled to a pro rata amount of paid holiday. An employee’s paid holiday leave starts from the first day of their employment and continues even if sick leave or maternity leave is taken.

Statutory Sick Pay

Statutory Sick Pay (SSP) should be paid at £89.35 per week for up to 28 weeks where fair notice is given by the employee otherwise the employer may have the right to refuse SSP.

Work Place Pension

All employees must be automatically enrolled into a workplace pension scheme. This is referred to as ‘Auto-enrolment’. This must be completed by 2018 unless an employee chooses to opt out of the scheme in writing. www.thepensionsregulator.gov.uk/en/employers

Employee Health and safety

Health and Safety legislation must be followed for every employee as you, the employer is legally responsible for them while they work at your premises. The right insurance should be taken out by your business to ensure that you are protected for every eventuality.

Maternity/Paternity leave

Ante-natal care classes can legally be taken as paid time off work where an employer can ask for proof i.e. documents. Maternity leave and paternity leave can be taken by new and adoptive parents. Maternity leave is 52 weeks where leave can be taken 11 weeks before and 2 weeks after the birth of the child. Paternity leave is 1-2 weeks. The amount paid during maternity leave as stated by the Statutory Maternity Pay (SMP) rule is 90% of average weekly earnings for the first 6 weeks and £140.98 or 90% of weekly average earnings for another 33 weeks (lower rate is paid).


In accordance with the ACAS Code of Practice an employer is legally required to set out all dismissal and disciplinary processes to employees in writing.

Employee Hours of work

All employees who are over 18 must work for 48 hours per week which may be longer but it must include one day off work. Employees who are under 18 must legally work only for 8 hours per day and 40 hours per week and no longer than this.

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