Social Security in United Kingdom

1. Legal Framework

The UK has a comprehensive social security system, funded from general taxation and from National Insurance Payments. The social security system provides state benefits to cover maternity/paternity, childcare, disability and carer matters. It also administers retirement pensions. State benefits can be contractually supplemented by employers. The national insurance fund aims to provide subsistence level benefits to all those in need.

2. Contributions

Employers are under an obligation to collect income tax at source from employment income, pensions and taxable state benefits under the Pay As You Earn (“PAYE”) system. Employed earners and their employers must also pay National Insurance Contributions (“NICs”). Various contributions are required to be made in respect of all UK employees. Class 1 contributions are payable in respect of earnings by both employer and employee. The rules are complex but the standard rate payable in most cases is as follows:

  • Employee primary contributions: 12% on earnings between £7,750 and £41,450, and 2% on any excess earnings;
  • Employer secondary contributions: 13.8% on all earnings in excess of the earnings threshold.

3. Insurances

Employers carrying on business in Great Britain are required to have in place employer’s liability insurance against liability for bodily injury or disease sustained by employees and arising out of and in the course of their employment in Great Britain. Some employers may offer employees benefits such as life assurance, permanent health insurance, private medical insurance and company cars.

4. Maternity Leave and other family leave

Pregnancy rights include health and safety protection and the right to reasonable paid time off for ante-natal care. Employed mothers/adopters are entitled to a total of 52 weeks’ maternity leave. Employees with 26 weeks’ service also qualify for Statutory Maternity/Adoption Pay which is calculated as follows:

  • six weeks at 90% of salary; and
  • 33 weeks currently at £136.78, or 90% of salary if that is lower.

Fathers/co-adopters continuously employed for 26 weeks are entitled to:

  • two weeks’ ordinary paternity leave;
  • two weeks’ Statutory Paternity Pay: currently at £136.78, or 90% of salary if that is lower; and
  • two to 26 weeks’ additional paternity leave if their spouse has not exhausted her maternity leave.

Parents/carers continuously employed for 26 weeks have the right to request flexible working, i.e. to change the hours/times they work or their work location, to care for a child or dependant. Although compensation for non-compliance, or for a decision based on incorrect facts, is capped at eight weeks’ pay. Employers may also face victimisation, sex discrimination and unfair dismissal claims following a refusal to grant the employee’s request.

5. Pensions

Pension provision in the UK is comprised of the State Pension and private pensions. Private pensions can either be arranged on an individual basis or through a scheme set up by an employer.

Pensions law is changing. Prior to 1 October 2012 employers were required to ensure that as a minimum requirement, employees have access to stakeholder pensions. Stakeholder pensions are normally set up as personal pension schemes and employers are not obliged by law to contribute to them. From 1 October 2012, employers have to ensure that workers in the UK, between the ages of 22 and state pension age, and earning over the income tax threshold (currently £9,440 pa) are automatically enrolled into a qualifying pension scheme to which the employer must contribute.  The duty is being phased in according to the size of the employer and will not be fully in force until 2018.

For more information on these articles or any other issues involving labour and employment matters in United Kingdom, please contact Robert Hill, Partner at Clyde & Co ( at
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