Setting up in the UK: Employment concerns

By Graham Shaw and Harry Parker, TLT LLP

Afavourable business regime and a long-standing relationship with India make the UK an attractive option for Indian companies. To run the operation, many Indian companies setting up in the UK mix secondees from India with UK nationals directly employed by the UK subsidiary. However, the employment relationship in the UK is heavily regulated and there are some significant employment rights to be aware of.

Any secondee from India will have the benefit of many of the same UK statutory employment rights as their UK colleagues. This is because under EU law, mandatory rules of the country in which an employee works apply automatically. UK statutory employment rights may therefore apply to Indian workers seconded to the UK, even if their contracts state that the terms of their contracts are governed by the laws of India.

Key rights

Employees in the UK are entitled to a written statement of terms and conditions that clearly sets out key elements of the employment relationship, e.g. pay, holiday entitlement, pension, notice of termination. There are laws on maximum working hours (with limited provisions for employees to contract out) and minimum annual holiday entitlement and minimum rates of pay.

Graham Shaw
Graham Shaw

Employees who have two or more years of continuous service have statutory protection against unfair dismissal. To avoid liability, employers must dismiss for a statutory fair reason and handle dismissals fairly. Continuous service with an associated company in India will count towards the qualifying period.

The Equality Act 2010 protects employees, workers and job applicants against suffering a detriment, and protects employees against dismissal, in connection with discrimination based on race, age, disability, sex, sexual orientation, religion or belief, pregnancy and maternity, marriage and civil partnership, and gender reassignment. The act also enables women to claim equal pay with men doing the same or broadly similar work (men can also claim equal pay with women).

The Equality Act 2010 requires careful consideration where a secondee from India is paid a lower rate than a permanent UK employee for the same work. Although caste discrimination is not mentioned in the act, the coalition government plans to introduce legislation specifically outlawing caste discrimination in the near future.

Over recent years UK governments have actively pursued a policy of encouraging “family-friendly” working practices. There are statutory rights to maternity leave and maternity pay; adoption leave; paternity leave and pay; parental leave; time off to care for dependents; and the right to request flexible working arrangements. There is also legal protection for part-time workers and fixed-term employees.

Harry Parker
Harry Parker

All employees have the right to join an independent trade union but there is no general requirement for a UK employer to recognize a trade union for collective bargaining purposes unless a given percentage of employees requests it.

The Data Protection Act 1998 imposes obligations on employers regarding the manner in which they store personal information about their staff, and transfers of personal data to countries outside the European Economic Area. Care should therefore be taken when transferring employee data to India.

The UK offers several business immigration routes, each with implications for employment and tax arrangements. Intra-company transfer visas may be available where there is already a UK operation and sole representative visas may be available for those establishing a UK operation.

Mitigating risk

Whether transferring Indian employees on secondment to the UK or recruiting in the UK, Indian companies should consider how they can best protect their confidential information, intellectual property and relationships with customers. This means ensuring that employment contracts include enforceable confidentiality provisions and, where appropriate, post-termination restrictive covenants to minimize the risk of damage caused by an employee joining a competitor. Indian companies should not assume that clauses entered into in Indian contracts will necessarily be enforceable in the UK.

Experience gained from advising Indian companies and defending litigation claims suggests that problems can arise where it is incorrectly assumed that UK law covering a particular employment issue is similar to Indian law in the same sphere, and/or that cultural and social mores and attitudes to work in the UK are similar to those in India. These risks can be mitigated by taking appropriate legal advice, and by ensuring that staff relocating to work in the UK receive appropriate induction training.

The employment rights discussed above are just some of those that an Indian company needs to be aware of when setting up a UK subsidiary. Given the volume and changing nature of regulation in this area, it’s important to get advice to avoid falling foul of the rules and inadvertently damaging one’s reputation or commercial operations.

Graham Shaw is a partner and Harry Parker is an associate at TLT LLP.

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