We have worked with a lot of US companies who are setting up a London office. Whilst we are two countries ‘divided by a common language’ according to folklore, conducting business is not radically dissimilar. However, there are a number of simple matters that can appear very different from a US perspective. Here are the ‘Top 10’.
- Employment Contracts. In the UK all employees are entitled to, and will expect, a contract of employment. Structuring this correctly will help in your hiring process.
- Notice period. UK employees are contractually bound to continue working for a certain period of time after they resign (usually 4 weeks or 3 months) – this should be factored into your hiring timetable.
- Benefits package. Depending on the sector, employees will be provided and paid for by the employer. A typical package in the UK will differ from that in the US (and generally be cheaper)
- Payroll. It is normal to pay UK employees on a monthly basis in arrears.
- Vacation. UK employees are entitled to a statutory minimum 28 days’ vacation per year (including public holidays) – many companies may give up to 33.
- Base Salary. It is acceptable to discuss total compensation package in US dollars however the base salary should be confirmed in Pounds Sterling.
- Tax / National Insurance. Tax is deducted at source on a monthly basis. The lower rate of 20% is applicable up to £37,400, the 40% tax band is up to £150,000 and 50% above that. National Insurance (the UK equivalent of Social Security) is payable by both employee and employer – the latter being 12.8% and needs to be considered for your staffing costs. The UK tax year runs from 6th April to 5th April.
- Pension. The government has introduced a new law to make it easier for people to save for their retirement. It requires all employers to enrol their workers into a qualifying workplace scheme.
- Drug Testing etc. Asking a UK employee to take a drug test may be surprising to them as would being asked to be fingerprinted. Background screening in the UK is possible with the consent of the individual. On the whole there is a less open approach to personal date than in the US.
- and finally….. (a) there is no UK equivalent of COBRA or 401k; (b) Contrary to popular belief the employment relationship is not disproportionately tilted towards the employee; (c) Local firms will usually be the most efficient and cost effective for services such as payroll or background screening whereas a global firm would be appropriate for tax structuring or multi jurisdiction partnership agreements.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE WOLF GROUP TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.