Pay and Benefits

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As a new employer, you will need to set up an approved automated recording system to pay your staff and track (and account for) their wage payments, overtime payments and expense reimbursements.

Employers and employees can freely negotiate and agree on pay and benefits, so long as there is no discrimination on any unlawful ground and the various rules (see below) are met.

National Minimum Wage

Hourly pay must meet the national minimum wage, including overtime and on-call time spent on the employer’s premises.

The minimum wage varies by age and can be checked here.

Compliance is assessed over each payment interval (ie for employees paid daily, it would be calculated for each day, if monthly then calculated each month).

Benefits other than accommodation do not count towards satisfying the minimum wage.

Holidays and breaks

Employees are entitled to at least 5.6 weeks' paid leave each year.

For employees working five days a week this means 28 days inclusive of public holidays. There is no requirement to give leave on public holidays.

Since 2015, voluntary overtime can be included in holiday pay.

Part-time employees should not be treated less favourably than comparable full-time employees in their entitlement to pay and benefits. On that basis, they are entitled to a pro-rated holiday entitlement, according to the proportion of full-time hours that they work.

Employees must be given a rest break if the work day exceeds six hours and cannot work for more than 13 hours a day. They must also either have 24 hours' continuous rest a weekor 48 hours a fortnight.

When an employee has taken more leave than they are entitled to and their employment has since terminated, an employer may be entitled to compensation, depending on whether the employee's contract of employment allows for this.

The employee's contract of employment should specify their entitlement to annual holidays. Otherwise, holiday entitlement is calculated by multiplying the number of days worked each week by 5.6. For example, workers who are contracted to work five days a week must get at least 28 days off a year (5 days x 5.6) including public holidays. If a worker is contracted to work three days a week, their leave entitlement will be 16.8 days off a year (3 days x 5.6).

Pensions: the new rules

From 1 October 2012, employers must enroll employees into the new government-established pension scheme called the National Employment Savings Trust or into another pension scheme meeting minimum requirements (Auto-enrolment).

However, Auto-enrolment has staged start dates and employers with fewer than 250 staff on payroll must comply only from an assigned date between April 2014 and February 2018.

All employees on the same PAYE (payroll tax) scheme count towards the threshold.

Employers and employees subject to auto-enrolment must make minimum pension contributions.

Pensions: the old rules

As of 1 October 2012, the old requirement to provide access to a designated stakeholder pension scheme Stakeholder Law was repealed.

Currently, employers who have not yet designated a stakeholder pension scheme have no obligation to provide pension access until they become subject to Auto-enrolment.

However, employers who have already made pension arrangements under the Stakeholder Law may choose to continue those arrangements and may be obliged to do that if any employees have already chosen to participate in that scheme.

Statutory Sick Pay

Employees who are absent from work through ill-health are entitled to Statutory sick pay at a rate set annually by the UK government.
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