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Leave, Holiday and Salary in the UK workplaces

  • In Employment
  • 22 Nov 2021, 01:51 AM
  • By Technologist Confidant
Leave, Holiday and Salary in the UK workplaces

The most significant way out of poverty is via work, and poverty can be reduced when low-wage earners receive more money and the jobless are encouraged to enter the labour force. To achieve greater equality, governments all around the world have introduced a national minimum wage. For example, in the USA or India, minimum wages are decided by state governments, but in the UK, it is more of a central approach.

The National Minimum Wage is the hourly wage to which practically all workers are entitled across the country in the UK. The National Living Wage is greater than the National Minimum Wage and is available to workers over the age of 23. All employers are bound, by law, to pay their employees the same minimum wage, which is 8.91 pounds per hour (as of April 2021) regardless of the organisation's size. Suppose an employer is not following the statutory payment, in that case, an employee can notify Her Majesty's Revenue and Customs (HMRC),department of the UK Government responsible for the tax matters, and the HMRC will take the employer to court on behalf of an employee, or an employee can directly approach the Employment Tribunal.

In the UK, many reputable organisations pay "Real Living Wage", a voluntary contribution calculated according to the cost of living. For example, the London Living Wage rate is £10.85 per hour, and the rate for the rest of the UK is £9.50 per hour.

Salary

Salary consists of base salary, bonuses, overtime, commission, expenses, nonmonetary extras, and is usually paid monthly or weekly. Often employees get confused with gross and net pay and ‘Cost to the Company (CTC)’. To explain, CTC means total expense the employer bears for an employee that includes salary components and contributions to NI and pension.

Gross salary is pretty much employee salary before any deduction, and net salary is the in-hand salary. An employer processes payroll monthly based on days worked, holidays, leave, employment contract terms and conditions.

Working hours, holidays and leave, tax, NI, pension

Unlike India, employees in the UK are limited by law (working time regulations) to 48 hours a week of working hours (8 hours per day, 9 AM to 5 PM). National holidays in the UK consist of religious holidays (Good Friday and Christmas Day) and bank holidays.

Every employee in the UK has the right to paid holidays (Statutory Annual Leave) irrespective of their nature of employment i.e., Full time, Part time and Zero hours contract. The number of holidays the employee gets depends on the number of hours or days the employee works or in cases of an extra agreement between the employer and the employee.

Every employee in the United Kingdom has an employment contract, which defines employment conditions, employee rights, obligations, and duties. When an employee joins a new organisation, they must submit Form P45, received from their last employer. In the United States, this is comparable to a Form W-2. Similarly, in India, an employee submits Form-16, which proves the employee's current salary and tax information. If an employee fails to deliver a Form P45 in the UK, the employer informs HMRC and the HMRC decides which tax code to use.

Leave (statutory annual leave, sick leave, maternity & paternity leave)

In the UK, statutory annual leaves are 28 days or 5.6 weeks (£94.25 a week) paid leaves per year. Usually the legal minimum holiday is made up of : 20 days i.e. 4 weeks and 8 extra days (bank holidays) which sum up the rest 1.6 weeks.

To get acceptance for the leave from the employer, the employee must apply well in advance i.e., at least twicethe number of holidays. For example: If an employee wants to take a leave for 10 days then he/she must apply for the leave at least 20 days before. 

However, the employer has the right to refuse the leave if they have a valid reason. Oftentimes the organisations combine annual leave with holidays such as Christmas and bank holidays.

PAYE, NI, income tax &pension

Anyone who is working in the UK has to pay UK income tax. An approximate 32 million people in the UK pay taxes. However, different tax rules in the UK determine the way income tax is collected.

Income taxes in the UK are collected in several ways. It depends on the type of income and the nature of employment i.e.,employed or self-employed. The different ways of income tax collection are:

  • Pay As You Earn (PAYE) for salaried class
  • Self-Assessment UK tax return for freelancers and other independent professionals.
  • Deductions at source
  • One-off Payments

UK employers pay income tax and National Insurance contributions via the PAYEsystem. This system refers to income tax which is deducted from your salary before you receive it. The money is sent to HMRC by the employer 'at source' – meaning directly from your pay before it reaches your account.

UK Employees pay National Insurance to be eligible for benefits like the state pension, jobseeker's allowance, and so on. At first, people coming to the UK to work should apply for a National Insurance (NI) Number; employers will not process salary without an NI number. 12% NI is paid by the employee on their earned salary

In the United Kingdom, the first £12,500 of income is considered a personal allowance. This sum is not subject to taxation. Income is taxed at increasingly higher rates beyond £12,500, depending on wages. The tax bands in Scotland differ from those in the rest of the United Kingdom. The tax rate may vary depending on where the employee is located in the United Kingdom.

BAND

TAXABLE INCOME

TAX RATE

Personal Allowance

Up to £12,570

0%

Basic Rate

£12,571–50,270

20%

Higher Rate

£50,271–150,000

40%

Additional Rate

£150,001+

45%

Every business in the United Kingdom is required to provide a workplace pension to their employees. Employers pay 3% minimum and employees pay 5%, and a total of 8% is submitted to the pension pot. By default, employees get enrolled for the workplace pension, but they have a choice to opt out if they wish.

From the age of 55 (57 from 2028) every employee can withdraw a lump sum pension amount from their savings and the rest can be withdrawn on a monthly basis. An employee does not have to pay taxes on the 25% of the pension amount he is withdrawing but will be taxed on the remaining 75%.

Knowing the fundamentals of the UK workplace can help overseas staff adjust swiftly and confidently. A comprehensive grasp of tax, pension, and pay rights will also empower international employees and keep them informed.