The Employment Relationship: Pay & Benefits

There are national minimum wage rules in the UK.

The rate of pay that applies will depend on the worker’s age and status.

In particular there are different pay rates for apprentices, under 18s, employees aged 18 to 20, employees aged 21 to 24 and employees aged 25 and over. These are reviewed by the Government each year.

Employers are required to account to the tax authorities for income tax and national insurance contributions through the Pay As You Earn (PAYE) scheme. It is common for employers to engage a payroll provider to assist with setting up a PAYE reference number and administering the scheme.

Since 1 February 2018 all UK employers have been required to “auto-enrol” their employees in a government compliant pension plan and to make minimum contributions into that plan, provided that the individual qualifies as an “eligible jobholder” under the relevant legislation. Minimum contributions are based on an employee’s ‘qualifying earnings’.

The minimum contribution rate for workplace pension schemes is currently 8% of qualifying earnings. At least 3% of this must be paid by the employer.

Although there is no obligation to do so, many employers provide non-cash benefits such as private medical insurance, life assurance and childcare vouchers.

Since 6 April 2020, all UK employment contracts must contain details of any benefits, whether contractual or not, or confirmation that there are no benefits. This excludes details of sick pay, pension, holiday pay and other paid leave, which must be set out separately.

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