As the world of commerce and the rest of society tries to find its feet again after the upheavals of the last two years, many business owners are now taking a fresh look at how and where they operate.
There is no question that how we work has changed, and that both new and established businesses are examining every aspect of their operations, from the hours we are required to work, to the need to have expensive office space in major cities. This is the case both for UK companies and overseas businesses that are considering relocating in the aftermath of the global pandemic.
Business owners are unsurprisingly looking for ways in which to reduce overheads as the economy and world trade get back on its feet, and one of the strategies increasingly being chosen by corporations, SMEs and start-ups is to relocate away from London and other big cities in England to the UK’s regional capitals, while foreign companies coming to the UK are likewise looking for less costly alternatives to London.
Why hire in Wales?
Wales can potentially be a big winner from this change in business thinking, with several factors contributing to its competitiveness.
A large, well educated workforce such as you find in Cardiff and Swansea broadens the range of industries and sectors in which businesses can operate, as evidenced by the large number of companies based in Wales now competing on the world stage.
However, as the cost of living across the board in Wales is significantly lower than London, the cost of wages too is lower. For instance, the average monthly salary in Cardiff is around 35% lower than in London (as at January 2022), which increases the competitiveness of companies operating from the principality.
Are there differences in employment and payroll law as compared to the rest of the UK?
The employment laws in Wales are the same as in England (although there are some differences to Scotland and Northern Ireland), as these laws are determined in Westminster and have not been devolved to the Welsh Assembly
Payroll and other employer costs for businesses in Wales
In the UK (including Wales), everyone who is over 16 and earning more than £184 a week is required to pay National Insurance contributions to qualify for the State Pension and other welfare benefits, Money raised from National Insurance Contributions (NIC) is spent on the National Health Service (NHS), health and social care across the UK.
Employee NICs are categorized into classes, with Class 1 being paid by the majority of employees. The current rate (as of April 2022) is 13.25% for people earning £797 to £4,189 a month, and 2% for people earning more than £4,189 a month.
The current rate of 13.25% includes an additional, temporary levy of 1.25% that is due to run until April 2023, when it is expected that the rate will return to the previous rate of 12%.
Employers in Wales are required to pay secondary contributions (employer’s National Insurance) to HMRC as part of a monthly or annual PAYE bill. In addition, employers are required to pay Class 1A or Class 1B National Insurance on work benefits given to employees.
Under the temporary 1.25% levy introduced in April 2022, employer Class 1 NICs are currently 15.05%, but are expected to return to the previous level of 13.8% in April 2023.
Employers also make a 3% contribution to each employee’s pension scheme (employees can choose to make an additional maximum contribution of 5%, bringing the total to 8%)
Overall, therefore, this means that employer payroll costs in UK are currently 18.05% until April 2023, when they will return to the previous level of 16.8%, making the UK in general (and Wales in particular) a relatively inexpensive location for companies wanting to open an overseas office.
Minimum wage, leave, termination and other employment law in Wales
Minimum wage in Wales and the UK
The UK currently has a minimum wage of £9.50 per hour for anyone aged 23 or over. For people aged 21 or 22 it is £9.18, for 18 to 20-year-olds it is £6.83, while for apprentices or anyone under 18 years of age, the minimum wage is £4.81 per hour.
Leave entitlements
Employees in Wales and the UK who work a 5-day week are entitled to 28 days of paid leave per year. Bank holidays do not have to be given as paid leave, and employers can choose whether to include bank holidays as part of an employee’s statutory annual leave.
As a special consideration, if employees have not been able to take their allotted annual leave because of Covid-19, it can be carried over to the next two years.
There are normally 8 Bank Holidays in Wales each year, although there will be an additional holiday on Friday 3 June 2022 to celebrate the Queen’s Platinum Jubilee, with the May 30 Bank Holiday being moved to Thursday June 2 to make a four-day long weekend to celebrate the monarch’s ascension 70 years ago.
Employees in Wales are entitled to receive Statutory Sick Pay (SSP) at a rate of £99.35 a week for up to 28 weeks (excluding the first three days of any absence). However, it may be that an employer and employee agree to a higher rate as part of a contractual benefit.
Statutory Maternity Pay (SMP) is paid in Wales for up to 39 weeks. Recipients receive 90% of their regular wage for the first six weeks, and for the next 33 weeks 90% of average weekly earnings or £156.66, whichever is lower.
Female employees in Wales are entitled to 52 weeks of maternity leave (26 weeks of ordinary leave and then 26 weeks of additional maternity leave). It is not mandatory to take all 52 weeks, but a mother must take at least two weeks off work after giving birth.
There is also the option for fathers to take one- or two-weeks’ paternity leave, paid at the same rate as SMP. Alternatively, parents may be entitled to Shared Parental Leave (SPL) and receive Statutory Shared Parental Pay (ShPP).
Employment termination
There is a statutory minimum notice period required for employment termination in the UK. When an employee is made redundant, if they have been employed for between one month and two years, at least one week’s notice is required. An additional week’s notice is required for every year of service between 2 years and 12 years.
Employers can, however, make payments in lieu of notice. Notice is not required in cases of gross misconduct.
If a worker is made redundant, they are entitled to receive severance pay, with the amount being determined by their salary (capped at £540 per week) and length of service (capped at 20 years).
