As novelist George Bernard Shaw said, “England and America are two countries separated by a common language”, a quote often used to highlight the differences between the UK and the US. This quote serves as a reminder that whilst we are culturally alike, and we approach business in similar ways there are often some important variations with the delivery; this is particularly highlighted in the differences in HR practices.
When setting up a UK subsidiary company, it’s vital to get your HR in place from the beginning as it often prevents a lot of issues occurring further down the line. Managing complex HR/legal problems locally is difficult enough but over time zones, and with different Employment Laws, is a major headache that US companies can do without!
Some Key Differences in UK and US Legal & HR Practices
The tables below illustrate some key differences in UK and US employment laws and practices.
|
Legal obligations |
UK |
US |
| Right to Written employment contract |
Yes. Must be provided on or before their first day of work and must include specified information. |
No. There is no requirement for a written contract of employment. |
|
Notice Period |
Contractual right to notice from 1 week during probation period and 1 – 6 months afterwards |
No requirement. Employment “at will” |
|
Applicable Laws |
UK and EU (reformation and revocation in 2023 due to Brexit) |
State and Federal laws |
|
Sick Pay |
Yes. Guaranteed minimum sick pay for up to 28 weeks, on statutory rates. Although most companies provide a level of Occupational Sick Pay. |
No sick pay. Up to 12 weeks unpaid leave for certain medical conditions. Sick days are customarily “rolled” into PTO (one bank for all paid time off) |
|
Right to a pension |
Yes. Automatic entitlement to a workplace pension. Minimum employer contribution of 3% (combined contributions must be at least 8%) |
No. |
|
Right to Private healthcare insurance |
No. National Health Service (NHS) funded through taxes. |
Heavily weighted on this benefit. Usually provided by employers of 50+ employees. |
|
Rights to minimum annual holiday |
Yes. 5.6 weeks or 28 days (pro-rated for less than full time working and can include public holidays). 28 days are accrued within 1st year of service. Typically holidays offered are between 28 – 35 days a year. |
No. There is no federal or state statutory minimum paid holiday leave. Paid leave is at the discretion of the employer. Typically US employees won’t reach a level of 28 days of PTO until their 5th year of service |
|
Right to Family leave |
Up to 52 weeks maternity leave. An absolute minimum of 2 weeks. Employees can also have paid adoption/paternity leave, share ‘maternity’ leave, and take unpaid parental leave of up to 18 weeks per child. Minimum statutory rates apply. |
Up to 12 weeks unpaid leave for eligible employees per year. |
|
Protection from unfair dismissal |
Yes. After 2 years. |
No. There are no unfair dismissal policies in the US. |
|
Regulation of working hours |
Yes. Limits apply to weekly hours, rest breaks and night working. Differences for young workers. Also relevance and limits to WTR (Working Time Regulation) – 48 hr. week. |
No. There is no regulation of working hours. |
|
Right to work |
Right to work status needs to be confirmed before the start of employment UK Nationals, (EU/EEA citizens’ automatic rights now depend on when arrived in UK). |
A Visa and an Employment Authorisation Document is required before you are able to work in the US. |
|
Right to join a trade union |
Yes, but no automatic right for a union to be recognised by an employer. |
Labour unions are legally recognised as representatives in many industries in the US. |
|
TUPE – Transfer of Undertakings (Protection of Employment) |
Yes. When a business changes owner (in a merger or acquisition), its employees may be protected under the Transfer of Undertakings (Protection of Employment) regulations |
No such protection. |
|
Employment Services (PEO vs EOR) |
EOR – Employer on Record Structure: EOR’s become the full legal employer of their client’s chosen talent or workforce Scale: Works for larger companies with full-time or temporary employees Risk: Reduces your liability Scope: Takes over your role as employer Costs: Results in lower long-term costs |
PEO – Professional Employment Organisation Structure: PEO’s acts as a co-employer and your Company outsourced HR Department Scale: Works for smaller companies with full-time employees Risk: Shares your liability Scope: Outsource your HR department Costs: Results in higher long-term costs |
In the UK it’s common practice to provide a new hire with a contract of employment, an often-lengthy legal document that the employee needs to sign. In the US, employment is considered ‘At Will’. In this case the employer and employee can terminate the relationship at any time and without cause. A contract is usually only used for Senior Executive levels and is rarely referred to in the US hiring process. In addition to the contract, it is also highly recommended to have an up-to-date Employee Handbook, providing details of your Company policies and processes so as to be completely and legally compliant in the UK.
Another major difference is employee benefits. In the UK there is the NHS, which offers free health cover. The US does not have this level of cover so benefits become a large component of an attractive offer for a new employee. However, that said, it is becoming increasingly essential in the UK to offer an attractive package, inclusive of benefits to attract the right talent in some market sectors e.g. fintech, financial services, consultancy, etc.. It is important to seek specialist help in developing your offer for prospective employees.
These examples illustrate that things are not straight forward when setting up your company and/or employing your team in the UK; however, with the right advice it’s easy to avoid common pitfalls so you can focus on the major goals of your business and not be distracted by unnecessary HR issues.
Our best advice is to take advice and International Management Answers is a good place to go!
Esther McLeod is a commercial, innovative and results driven Consultant/Interim with over 25 years experience in HR & business arena. She is currently holding the position of HR Consultant/Director at International Management Answers (IMA).
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