Given the far distance between the two, why would Japanese companies even look towards the UK for potential new employees? This can come down to a few primary reasons.
For one, the United Kingdom has an innovative, skilled and highly educated workforce. The UK is home to some of the world’s top universities and research institutions. For Japanese companies looking to collaborate on research and development projects, the UK’s strong academic and research ecosystem is the perfect fit.
Additionally, while there is a significant time difference between Japan and the UK, the UK does have an advantageous time zone. With only a one hour time difference, UK employees can communicate easily with European markets and clients. As for the Americas, London is only five hours ahead of New York, so communicating with clients can be just as easy. This time zone advantage allows business to operate throughout all hours of the day and easily tap into global markets.
And, despite the UK’s departure from the European Union, the UK serves as a strategic gateway to the European market. When Japanese companies hire in the United Kingdom, they have an established base that allows them to tap into the European customer base.
However, what Japanese companies need to know when they hire in the UK is that there are numerous compliance elements to follow. The United Kingdom is home to complex local employment laws and long-standing legislation that protects workers. For instance, did you know that there are two different types of notice periods in the UK?
Fortunately, a UK EOR, like Borderless, can help. An Employer of Record makes it an absolute breeze when you hire in the UK. While we do the heavy lifting, you can focus on developing essential business connections with your new employee.
Here’s what you need to know when you hire in the UK as a Japanese company.
What do Japanese companies need to stay compliant?
The United Kingdom has complex local labor laws that regulate everything related to employment. This includes employment contracts, work weeks, income tax, payroll, statutory benefits, employee protections, and annual leave.
Classification
When you hire in the UK, classification is paramount. While most countries have employees or contractors, the UK goes beyond that. They have added the term “worker” to the mix. Over time, the definition of worker has evolved in the United Kingdom, especially regarding the distinction between independent contractors and workers. With that, it’s especially important for employers to correctly classify their employees.
In the United Kingdom, a “worker” is a term that includes different groups. Workers can be full-time employees, part-time employees, short-term workers, casual laborers and agency workers. Those who are employed under a zero-hour contract are also workers.
While employees have a far more extensive set of rights compared to workers, both groups have certain legal entitlements, such as the right to receive the National Minimum Wage or National Living Wage, protection against discrimination, and rights related to working hours and breaks.
Standard work week
The Working Time Regulation 1998 legislation outlines the standard work week for employees in the UK. It states that employees are not to work more than 48 hours each week and that they must receive their required rest breaks. If an employee works overtime, an employer is not required to pay them for it.
Employees are entitled to receive, at minimum, 11 hours of rest between work days, and at least 20 minutes of rest if they work a six hour day.
The Working Time Regulation 1998 also states that all workers are entitled to a minimum of 5.6 weeks of annual paid holiday. When hiring from the UK, Japanese employers must keep this in mind.
Payroll
Every country has a different payroll cycle that employers must adhere to. Much like Japan, the UK operates on a monthly payroll cycle. However, they do allow employees to be paid on a bi-weekly schedule if necessary.
Employees are entitled to the National Living Wage. The National Living Wage is regulated by the National Minimum Wage Act 1998. This states that workers must be at least 16 years old to receive minimum wage, and workers over the age of 23 must be compensated at least the National Living Wage. The National Living Wage is updated every April to adjust for inflation and cost of living. Currently, as of April 2023, the National Living Wage is set to GBP 10.90
The minimum wage in the UK is as follows:
- 21 to 22 years old: GBP 10.18
- 18 to 20 years old: GBP 7.49
- 16 to 17 years old: GBP 5.28
- Apprentice rate: GBP 5.28
When Japanese companies hire in the UK, they must pay their employees according to the employment contract. In the instance that an employer pays less than what they agreed upon with the employee, it is considered an unlawful deduction of wages under Section 32 of the UK Employment Rights Act 1996. This may result in employers being brought to the employment tribunal in the UK.
In addition to adhering to the minimum wage and payroll cycle, employers must also contribute 13.8% of an employee’s salary towards social security, including national insurance. This is to cover mandatory benefits an employee receives, such as healthcare, redundancy pay, annual leave allowances, statutory sick pay, and others.
Employment contracts
The United Kingdom has different types of employment agreements and corresponding legal responsibilities. The most common type is a permanent, full-time contract. However, employers may use a different type of employment agreement, such as a fixed-term contract or zero-hour contract.
Indefinite contracts
Employment contracts are required by all employers hiring in the United Kingdom. An employment contract in the UK is commonly referred to as a Written Statement of Employment Particulars. This is a two-part document, which comprises a Principal Statement and a second, more general statement of employment.
Principal Statements must include the following information to be compliant:
- Employer's name
- Employee’s name
- Job title
- Job description
- Start date
- Compensation
- Payroll cycle
- Work hours
- Holiday allowance and if this includes public holidays
- Restrictions when working abroad
In the general written statement, this must include information regarding non-mandatory terms of employment. This is to include training, probationary periods, severance pay, collective agreements, disciplinary procedures, and an extended notice period in the UK.
Fixed-term contracts
Fixed-term contracts are a type of employment contract that have a definitive start and end date. These contracts are used for when organizations are testing new roles or covering for an employee that is on leave, like maternity leave.
The United Kingdom does have limitations regarding fixed-term contracts. Unless the employer can provide a reason not to do so, any employee on a fixed-term contract for more than four years will automatically become a permanent employee. When you hire in the UK, be mindful of these limitations if you plan on drafting a fixed-term contract.
Employers must treat employees on a fixed-term contract the same as they would a full-time employee. Meaning, employers must contribute to social security, provide them with paid holiday, and the right to flexible working.
Termination
While countries around the world provide protections for employees from unlawful termination, the United Kingdom does not — not until the second year of employment, anyways. So, employers do have the ability to terminate their employees for any reason except any grounds related to the Equality Act of 2010.
Equality Act 2010
Employers cannot terminate their employees for any grounds stated in the Equality Act 2010 — but what is it, exactly? Basically, the Equality Act 2010 is a piece of legislation that protects employees from discrimination, especially related to pay, promotion, and termination. This applies to the following:
- Age
- Disability
- Sex
- Gender reassignment
- Marriage
- Pregnancy
- Religion, belief or spirituality
- Race
Employees have the right to complain to the employment tribunal if they have been unfairly dismissed, especially under the grounds of the Equality Act 2010.
Notice periods
Employers must provide employees with a notice period in the UK.
There are two types of notice periods in the UK: mandatory notice and the notice period stated in the employment contract. Mandatory notice, judging by its name, is required by law. The employee’s length of service determines the notice period.
- One month to two years of employment: One week’s notice
- 2 to 12 years of employment: One week’s notice for each year of service
- 12+ years of service: 12 week’s notice
For notice periods stated in the employment contract, that is completely up to the discretion of the employee and employer. However, it must meet the minimum requirements of the mandatory notice period in the UK.
Sometimes, employers choose to send the terminated employee home for the duration of the notice period. In this case, employees are still paid but are not required to work.
Additional considerations
There are numerous aspects of compliance to consider when hiring in the United Kingdom. However, there are also additional factors to keep in mind. While these are not required by law, they are common in the UK’s working culture.
Severance pay
Severance pay in the UK is not legally required from employers. Severance pay isn’t uncommon though, and many employers choose to offer it. When an employer does choose to provide severance pay, the amount is completely up to them. It’s important to note that this must be outlined in the employment contract. In the instance that severance is outlined in the employment contract, but not paid upon termination, employees have the right to file a complaint about their employer to the employment tribunal.
Statutory redundancy pay
That being said, the UK does protect employees when it comes to redundancy. Statutory redundancy pay is for employees who have been working for their employer continuously for two years or more.
Statutory redundancy pay varies by age, earnings, and length of employment. To make it easy to understand, the UK has provided a useful tool to calculate your statutory redundancy pay. Essentially, your statutory redundancy pay would be the average pay you earned per week over the past 12 weeks before you were made redundant.
Probationary period
Probation periods in the United Kingdom are referred to as trial periods. These trial periods are not legally required, but are commonly offered by employers. Trial periods in the UK generally last three months.
Once the trial period ends, and is successful, the employee will usually be offered an indefinite contract. If necessary, a trial period can be extended if the employer feels like the employee needs more time to be comfortable in the role.
Employees can be dismissed during their probationary period, however, it must be compliant with the terms outlined in the employment contract.
Flexible working accommodations
In July 2023, the UK passed the Employment Relations Bill, which is commonly known as the Flexible Working Bill. This would allow employees to request flexible working arrangements from when they start employment. Employees would be able to make two flexible working requests per year. Keep this in mind when hiring both in-office and remote workers in the UK.
How to hire in the UK
There are two primary ways Italian employers can hire in the UK: by setting up their own foreign subsidiary or working with an Employer of Record (EOR). An UK EOR will make hiring abroad an efficient, compliant, and overall positive experience.
Foreign subsidiary
More often than not, independently establishing local entities can get costly and time-consuming. It also requires comprehensive knowledge of the United Kingdom’s ever-changing labor laws, tax obligations, and regulations.
Put simply, setting up a local legal entity on your own in the UK can get messy and expensive. And depending how many workers you plan to hire in the UK, it might not even be worth it.
Work with an EOR
Hiring laws in the UK may be intricate, but thankfully, an UK EOR takes care of absolutely everything regarding employment to guarantee compliance. An employer of record service acts as the legal employer, maintaining a direct employment relationship with your workers in compliance with local laws.
Other tasks a UK EOR takes care of include:
- Right to work entitlements
- Contracts for international employees
- Onboarding processes
- Tax laws and filing
- Payroll processing
- Employee benefits
- Intellectual property protection
- Termination
- Employee data management for foreign workers
Basically, an EOR makes it easy when you hire employees in the UK. An Employer of Record ensures compliance when it comes to employment laws paying your international employees.
How much does it cost to hire in the United Kingdom?
Now that you know how to compliantly hire in the United Kingdom, you need to figure out how much it will actually cost.
Aside from salary considerations, employers in Japan need to consider the entire compensation package. This includes social security contributions, bonuses, and fringe benefits.
Doing this can be tricky on your own. Thankfully, you don’t have to — a global payroll solution like Borderless can help.
Salaries across the United Kingdom
Salaries across the United Kingdom vary significantly. While there are differences across industries, there are considerable differences across locations.
For example, the average salary in London currently stands at just over GBP 57,000. Whereas in Manchester, a bustling city in the north, filled with new tech start ups and creative agencies, the average salary is GBP 39,000.
In Glasgow, the average salary is GBP 34,500. While this may only be a few thousand pounds less than Manchester, the cost of living in Glasgow is significantly lower than Manchester and London.
Where Glasgow and other smaller cities in the UK may have a lower cost of living, the cost of living in the south of England — specifically London — has been on the rise.
Because of this, there have been numerous campaigns advocating for the London Living Wage to become legally required. Where the National Living Wage stands at GBP 10.90 per hour, the London Living Wage is a pound more at 11.95 per hour. The London Living Wage is to ensure that everyone has access to equitable standards of living.
Non-mandatory benefits
Supplemental benefits, also referred to as non-mandatory benefits or fringe benefits, are additional employee benefits in the UK. When employers are looking to provide fringe UK benefits, what they offer is up to them.
Non-mandatory benefits, also known as supplemental benefits or fringe benefits, are an extra cost to consider, and another factor to outline in the employment contract.
Common fringe benefits employers offer for UK employees include transportation passes, gym memberships, private health insurance, retirement savings plans, or employee stock options.
Some employers may also choose to offer coworking passes, unlimited paid time off, or home office allowances for their remote workforce.
Why offer non-mandatory benefits?
When you hire in the UK, you may want to consider offering non-mandatory benefits. Providing your UK employees with non-mandatory benefits is extremely advantageous to both employees and employers. A well-crafted benefits package gives organizations an upper hand to draw in top talent from across the world. And, offering worthwhile benefits increases employee performance, satisfaction, and retention.
Managing a remote workforce in the United Kingdom
This will be especially challenging for a Japanese company given the vast time difference. It will require policies, communication, and adjusting to asynchronous communication.
Asynchronous communication
The United Kingdom is eight hours behind Japan, so when your UK employees work day is starting, yours is ending. To be successful, this will require asynchronous communication.
Asynchronous communication allows team members to communicate on non-urgent matters without waiting on people in a different time zone to respond. To resolve issues, they align their schedules to hash out any issues.
Asynchronous communication also involves some core working hours to overlap. For example, your employees in the UK could work from 7 a.m. GMT — which would be 3 p.m. in Japan — to allow for some brief overlap to allow for meetings or collaboration.
Implementing a flexible work policy
When you hire a remote workforce in the United Kingdom, you’ll need to implement a flexible working policy.
A flexible work policy refers to when an employee works. It provides employees with the ability to set their own schedules or change their work hours as opposed to working core office hours, like seven to three, or nine to five. For instance, a flexible work policy will allow employees to work early in the morning and log off early in the afternoon, or vice versa.
Work With Borderless
Eager to start hiring in the United Kingdom? Work with Borderless to get started. Book a demo today.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
