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Compensation & Benefits in GbUnited Kingdom.






Country Capital



Pound sterling (GBP)

UK compensation laws differ from those in other countries, and it’s important to understand these differences to stay compliant while hiring internationally. From the National Minimum Wage (NMW) to the cap on the working week, there are many components that factor into compliant compensation and benefits.

UK compensation laws

One critical UK compensation law is the NMW. The minimum wage depends on the employee’s age, so you can utilize different calculators to ensure you pay every employee a fair and legal wage. The country also has a legally mandated 48-hour workweek. Employees can opt out of this mandate if they’d like to work more hours, but you need to know their preferences ahead of time when crafting daily schedules. Employees are entitled to be paid overtime where an employment contract provides for it.

In the case of a termination, the UK doesn’t have statutory requirements for severance pay, except for redundancies. Any employee who’s worked continuously for two years or more has the legal right not to be unfairly dismissed and the right to the statutory redundancy payment (SRP).

Guaranteed benefits in the United Kingdom

UK compensation laws are structured to benefit employees. Therefore, an employer needs to stay aware of every benefit and entitlement. For example, employees who work more than 6 hours a day are automatically entitled to a 20-minute break away from work. An employer can often work out the bonus schemes in an employment contract, which should be provided to an employee within 2 months of their start date. However, it is customary to agree to the employment contract ahead of the start date.

The employer’s portion of the National Insurance Contribution (NIC) provides the primary statutory benefit of UK health insurance. However, many companies choose to offer supplementary benefits such as medical, vision, dental, and life insurance that are not guaranteed in UK employment law.

Restrictions for benefits and compensation

Any employment contract in the UK needs to include compensation stated in British pounds (GBP). Employers must ensure they pay their employees in the country’s currency.

Employees’ benefits are not typically covered when they travel outside the UK. If employees will travel internationally, the employer should cover the employee under a travel insurance policy.

United Kingdom competitive benefits planning

If you’re establishing a business internationally, building a competitive employee benefits plan is critical when it comes to recruiting and retaining leading professionals. Designing UK employee benefits plans requires compliance with national and local labor laws, balance with your company’s available resources, and navigation of local market standards.

UK employee benefits plans

To be competitive in recruiting and employee engagement, you’ll need to consider local standards and ensure your workers receive the benefits they’re expecting.

Along with perks such as a company car or phone, travel reimbursements, and other practical assistance, you can also provide benefits to cover life events your employees must navigate. These supplemental benefits aren’t legal requirements, but they are common market standards:

  • Income protection
  • Private medical insurance
  • Private dental insurance
  • Health cash plan
  • Life assurance
  • Employee assistance programs
  • Dental insurance

Requirements for employee benefits in the United Kingdom

The UK has several requirements for employers to follow in terms of benefits. You’ll need to cover the following in your plan:

  • Pension
  • Healthcare
  • Holiday pay
  • Parental leave
  • Sick pay

How to design your employee benefits program

To build a competitive employee benefits program that meets your workers’ needs, you can follow some key best practices.

1. Identify company benefits objectives and budget.

Your first step is to evaluate your business’s available resources and your goals for providing employee benefits. Assess your budget restraints, research market standards for your industry, and determine your priorities to provide for employees. If retention is a priority, for example, you might opt to provide more robust benefits for a small team.

2. Conduct a needs assessment.

To make your plan competitive, you’ll need an understanding of what other local companies are offering and what employees want. You can consider interviewing local employees, sending out questionnaires, doing a comparative benefits analysis, and analyzing legal regulations. Your company will benefit from in-depth data on the market and employee expectations and needs.

3. Build an employee compensation and benefits plan.

Once you’ve completed a needs assessment and gap analysis, incorporate the data into a benefits plan. Use your research to prioritize key benefits. Remember to consider administration costs, employee contributions, outsourcing requirements, and cost containment features as you build a benefits program.

Average cost of benefits per employee

Your benefit costs will vary based on the plan you create for your business. It’s best to set a customized budget based on your unique requirements rather than relying on a one-size-fits-all average cost. You might find it useful to establish a percentage of revenue to put toward your benefits program so you can more easily scale it as your company grows.

As you develop your benefits program, be sure to consider your budget requirements and any additional costs involved. Ensure that you’re building a sustainable plan that will help you reach long-term goals.

How to calculate employee benefits

The employee benefits you must provide are based on government regulations in the UK.

Currently, employees must have a pension scheme of 9% of qualified earnings, with the employer contributing at least 4% of the total. The market standard is significantly higher than the minimum level in most cases, so make sure you’re providing an appropriate rate to keep your benefits offerings competitive.

You should provide full pay for holidays, parental leave, and sick leave.

Supplemental benefits may include contributions from both you and your employees. You’ll want to research market standards in your industry to calculate competitive rates.

How are employee benefits taxed in the UK?

Employees must pay taxes on supplemental benefits such as a company car, accommodations, bonuses, or assets provided. As an employer, you are responsible for withholding these taxes on a Pay As You Earn (PAYE) basis. It is crucial to understand the tax implications with any additional benefits offering.

Employee health benefits plans

While the National Health Service (NHS) provides coverage for UK residents, many employers also offer private insurance options to cover services such as dental and vision care. In either case, employees are entitled to healthcare benefits. You are also responsible for providing parental leave and sick leave pay.

Partner with G-P to build your everywhere workforce.

As your partner in global expansion, G-P will handle payroll and compliance, so you can focus on growing your team and scaling your business. Our market-leading Global Growth Platform™ is powered by the first fully customizable suite of global employment products and backed by the industry’s largest team of in-country HR and legal experts to streamline payroll management and help you offer competitive, compliant local benefits.

Learn more about our platform and request a proposal today.


THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

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