Doing Business in Northern Ireland
solicitors since 1896
DISPUTE RESOLUTION Patrick Brown Managing Partner T +44 (0) 28 9055 3336 M +44 (0) 77 3448 3847 E patrick.brown@tughans.com
DISPUTE RESOLUTION Michael McCord Senior Partner T +44 (0) 28 9055 3314 M +44 (0) 77 3688 6603 E michael.mccord@tughans.com
CORPORATE John McGuckian Partner T +44 (0) 28 9055 3338 M +44 (0) 78 2514 7133 E john.mcguckian@tughans.com
EMPLOYMENT Anna Beggan Partner T +44 (0) 28 9055 3371 M +44 (0) 79 2018 7761 E anna.beggan@tughans.com
IT/IP Adrian O’Connell Partner T +44 (0) 28 9055 3395 M +44 (0) 78 2526 4732 E adrian.oconnell@tughans.com
REAL ESTATE David Jones Partner T +44 (0) 28 9082 0531 M +44 (0) 78 2514 7135 E david.jones@tughans.com
There are many reasons to invest in Northern Ireland, from our highly skilled workforce, our advanced infrastructure, our competitive costs, our access to markets, our business supportive environment and our developed legal system. Northern Ireland is one of the most cost-efficient business environments in Europe, with our capital city Belfast being named as Europe’s most Business-Friendly City of its size in 2016. Our firm has unrivalled knowledge covering all the legal aspects of foreign direct investment into Northern Ireland, having worked alongside international businesses investing in the region for over 30 years. We offer a full service to meet your specific legal requirements including advice on employment law, real estate, commercial agreements, corporate structuring, government funding and corporate finance. We also work beyond Northern Ireland through strategic alliances with international law firms, carefully managing the process to ensure continuity of client care, as well as delivering local expertise at every stage of the transaction. We recognise that most businesses find it helpful to have an overview
of the legal landscape before finalising their investment plan. Many businesses have similar initial queries relating to corporate, real estate and employment law issues. In response, we have compiled a guide to provide a high-level introduction to some of the key legal topics of interest to companies doing business in Northern Ireland. If you have any specific queries please get in contact with one of our team.
“Tughans is our trusted partner in our journey as employers in Northern Ireland. Its solicitors are exceptional and provide us with honest and reliable legal advice and guidance, which makes a tremendous difference when dealing with our day-to-day issues or our most complex employee relations cases. We are extremely appreciative of Tughans and we are looking forward to maintaining our partnership for years to come.”
Corporate
Our Corporate Department has significant expertise advising on all aspects of corporate law. We work with international clients from across the globe who are seeking to establish and grow operations in Northern Ireland. We regularly advise on establishment, structuring and reorganisation transactions, as well as acquisitions and disposals by international companies through their Northern Ireland businesses. Our team also advises on corporate governance and compliance requirements under Northern Ireland law, and can provide Company Secretarial services if required. https://www.tughans.com/services/companysecretarial/ We regularly review agreements, offer letters and documentation from investment agencies, including Invest Northern Ireland. Our dedicated contracts and technology team can advise on commercial contracts, as well as intellectual property, data protection and privacy law.
Procedure for incorporation
Business structures
There are several ways in which an overseas entity can establish a business or acquire business interests in Northern Ireland. The main methods are: i. the incorporation of a private limited company, ii. the setting up of a branch or place of business (referred to as a “UK establishment�), iii. the appointment of an independent agent or distributor. iv. the establishment of a business by means of joint venture (including a partnership); and v. the acquisition of an existing or an interest in an existing company or business. The decision as to the most suitable type of business vehicle will depend upon a number of factors, including the nature of
the intended activities in the UK, taxation and employment issues, and financing and funding considerations. The majority of companies registered in Northern Ireland are private companies limited by shares. They are the most popular form of business entity for inward investment projects. The shareholders of a private limited company have limited liability.
To incorporate a private company limited by shares, certain documents must be publicly filed with Companies House. These include details of the proposed name of the entity the shareholders, directors and company secretary, (refer to our IP and Data Protection: Choosing a Company Name section for additional details). Once all incorporation details are available a company may be incorporated in as little as 24 hours using the UK Companies House web incorporation process. The main constitutional document of a Northern Irish registered company is the Articles of Association. Model Articles of Association in a basic form prescribed in the Companies Act 2006, may be registered upon incorporation. Most companies move to adopt more bespoke Articles of Association by passing a shareholder resolution, particularly upon taking in any equity investment, or where there are multiple shareholders, or only one director. If the company is a wholly owned subsidiary, which is often the case for
companies establishing here, we have streamlined Articles of Association that can be adopted. To be incorporated in Northern Ireland, a company must have a minimum of one director. There is no limit to the number of directors or shareholders that a private limited company may have but its shares cannot be offered to the general public to purchase. A company incorporated in Northern Ireland is recognised as a UK company and is free to trade throughout the UK without having to register any additional places of business in England, Wales or Scotland. A company incorporated in Northern Ireland is subject to the same primary legislation (the Companies Act 2006) as all other UK companies. This means that, for the most part, legislation relating to issues such as corporate governance, directors’ duties, shareholder rights is harmonised throughout the UK. A company incorporated in Northern Ireland is subject to the UK tax regime.
Residency requirements
Setting up a UK establishment
There is no requirement for any directors or shareholders to be resident in Northern Ireland, but if none of the directors are resident in Northern Ireland an address for service in Northern Ireland must be provided. This can be the same as the company’s registered office address. A company incorporated in Northern Ireland must have a registered office address located within Northern Ireland.
An overseas company will have a UK establishment or branch if it is trading in Northern Ireland and has a physical presence in Northern Ireland, such as a place of business or a branch, through which it carries on business.
There is no requirement to have a company secretary but one may be appointed if desired.
Within one month of opening a UK establishment an overseas company must register with Companies House. Filing requirements for a company’s first UK establishment include copies of constitutional documents (certified) and its latest set of accounts. An overseas company with a UK establishment is usually required to file some form of accounting documents at Companies House. It will take longer to register a UK branch because the foreign registering company must submit additional documents and information to Companies House. The review process for this can take up to 4 weeks.
The format depends on whether the company is required to prepare and disclose accounting documents under its parent law and if it is an EEA company (a company governed by the law of a country or territory in the European Economic Area). Changes to the original information supplied to Companies House should be notified, including changes to directors, secretaries, the corporate or alternative name registered in the UK and constitution. If a company is not required to file accounts under its parent law it is still under a duty to prepare, sign and deliver accounts to Companies House. An overseas company with a UK establishment must state on all business letters, order forms and websites that are used to carry on business in the UK:
• the company’s name; • where the establishment is registered; and • its registered number. The characters must be visible to the naked eye and additional information is required for companies registered outside the EEA. Overseas companies with a UK establishment must file accounts with HMRC: https://www.gov.uk/ government/organisations/ hm-revenue-customs
Appointing an independent agent or distributor
Annual returns
Many companies use a resale channel to sell their goods and/ or services within or outside Northern Ireland. There are a few important distinctions between an agent and a distributor under Northern Irish law, and regardless of the nominal title used in any agreement, the Northern Irish courts will look at certain criteria in deciding whether a reseller is an agent.
Companies must deliver a confirmation statement. This statement must state that the company has delivered all the information it was required to provide in the review period to which the confirmation statement relates. The review period means the 12 months beginning with the date of the company’s incorporation. The confirmation statement must be delivered within 14 days of the end of the relevant review period and must include information such as any changes to the registered office address, shareholders and capital.
These criteria include: • level of risk (in terms of ownership of goods and credit risk) assumed by the reseller; • level of control exercised over activities of the reseller; and • control of the price and other terms upon which the goods/ services are sold. The European Union Commercial Agents Directive applies to all self-employed agents that have continuing authority on behalf of the principal and that are based and sell goods in the EU, regardless of the location of the principal. This Directive sets out a
number of important obligations for companies using agents to sell goods (it does not apply to the sale of services) in the EU. Notably, the agent has the right to receive compensation in certain circumstances if the agency is terminated. It is not possible to contract-out of the Directive. Distribution agreements are currently subject to both the EU and UK competition law regimes. If a distribution agreement does not comply with the relevant competition law regime, it may be unenforceable. It is generally advisable to consult with a specialist solicitor while negotiating, and before finalising, any distribution or agency agreement, and even standard-form agreements should be checked to ensure their enforceability.
The Companies Act 2006 requires all companies, whether they are trading or not, to keep accounting records. All private limited and public companies must file their accounts at Companies House. There is no charge for filing accounts at Companies House but there are fines for late filing. We can advise on all your required annual returns in line with your selected business structure. Additionally we can provide our
clients with a range of company secretarial services through Tughans Company Secretarial, offering a cost-effective and tailored service to assist their business in meeting its particular compliance requirements. Tughans Company Secretarial https://www.tughans.com/ services/company-secretarial/
Persons with significant control
A UK company or LLP must keep a register of persons with significant control over it (its PSCs) unless it falls within one of certain specific exemptions. The exemptions apply only to publicly traded companies listed on the main stock exchange. Companies and LLPs must file their PSC information annually at the UK companies’ registry, which is available to the public. Broadly, a person has significant control over a company if any of the following apply: • The person holds more than 25% of the company’s shares (measured by nominal value, not by number of shares). • The person holds more than 25% of the company’s voting rights. • The person can appoint or remove a majority of the company’s directors (measured by number of board votes held, not by number of directors). • The person has the right to exercise, or actually exercises,
significant influence or control over the company. (This is a broader condition which captures other forms of control, such as extensive veto rights under shareholders’ agreements. The UK Department for Business, Innovation and Skills has published statutory guidance on situations that may satisfy this condition). • The person has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or firm which does not have separate legal personality, and the trust or firm satisfies one of the other four conditions above. These conditions apply regardless of whether the person holds shares in the company and is registered in the company’s shareholder register. The purpose of the PSC regime is to prevent the ultimate owner of a company from concealing his or her identity by, for example, hiding behind a trust or an offshore company.
Failure to comply with an information request is a criminal offence. In addition, if a PSC persistently fails to comply with an information request, the PSC’s interest in the company (which can comprise shares or other rights) can be restricted. The PSC will not be able to transfer that interest, and all voting and dividend rights attached to the interest will be suspended. The regime also applies to LLPs with some modifications. Under the Fourth European Union Money Laundering Directive, the regime will need to be extended to other kinds of legal entity in due course.
Banking & Finance
Our experienced Banking and Finance Department regularly acts on complex multi-jurisdictional transactions alongside our corporate department, and has unrivalled experience of acting on finance and M&A transactions with internationally based investors and purchasers. Banking sector regulations The banking sector in Northern Ireland is regulated by the Bank of England, the Financial Conduct Authority and the Prudential Regulatory Authority of the United Kingdom. The banking sector in Northern Ireland is a strong and wellregulated sector. Northern Ireland’s banks provide generally easy access to a full range of banking and financial services including account banking, loans and structured debt, trade finance, invoice finance, foreign exchange and commodity finance. All the major UK and Irish banks have a presence in Northern Ireland – either directly or through a local affiliate – and all
are responsive to the needs of businesses with interests in both Northern Ireland and the Republic of Ireland. The provision of banking services is generally available to business with minimal formalities. All lending decisions will be subject to credit approval and will often require some form of security or supporting guarantees to be provided if debt facilities are being sought. There is no standard lending approach in Northern Ireland and each bank will operate its own credit and lending policies. Early engagement with your preferred bank is encouraged to ensure that all required information is provided at an early stage to ensure a smooth lending process. In addition to the established banking sector, credit facilities can also be obtained through alternative credit providers such as asset financiers, invoice finance and trade finance specialists, mezzanine lenders and investment funds more generally.
Opening a UK bank account
Such providers are unlikely to provide account banking services but can provide tailored credit solutions in their specialist areas. Such providers tend to be smaller in scale than their established bank counterparts but provide a specialist solution in their niche market. The process of taking and enforcing security in Northern Ireland is relatively straightforward and Northern Ireland is considered, in common with the rest of the United Kingdom, as a creditor friendly jurisdiction in which to take and enforce security. Northern Irish law recognises the use of security trust and security agency structures. It is also generally permissible for a creditor to take security over all property and assets of a company either by way of floating charge over all of a company’s property, undertaking and assets or by way of specific charges or security assignments over specific assets. Outside of insolvency, security can generally be enforced without court assistance, although certain restrictions can apply.
There are no exchange controls effective in Northern Ireland. The UK’s anti-money laundering and counter terrorist financing legislation applies equally in Northern Ireland as it does in the rest of the United Kingdom. Under that legislation, financial institutions are obliged to take steps to verify the identity of their customers and to prevent proceeds of criminal and terrorist conduct being laundered through the financial sector. The anti-money laundering and counter terrorist financing legislation which applies in the United Kingdom takes a similar approach to that which applies in the rest of the European Union and in the USA and is strictly adhered to. Some useful websites include: Financial Conduct Authority www.fca.org.uk Bank Of England www.bankofengland.co.uk
Each bank has a slightly different process for opening a business account. In most cases you will need to have: • a UK place of business address; and • a company representative residing in the UK (usually a director or an employee). No matter where you intend to locate your business, you should contact the central corporate banking team of your chosen bank, generally located in Belfast. Do not apply through a local branch, online or a call centre. Tell the bank that you have foreign shareholders and/or directors of your business and that you need a UK business bank account (rather than an international business bank account that is held offshore). After you have done this, you can do most of the application process online and over the telephone. You will need to provide photographic
identification and proof of address for all directors and any substantial shareholders. The bank will also need to meet at least one representative of your company face-to-face in the UK to sign a bank mandate to open the business bank account. Once your bank account is open, you will be able to use your local bank branch for your day-to-day banking needs. It can take somewhere between three weeks to three months for a bank account application to be approved and meetings to be arranged, so factor this time into your business planning process.
Choose a company name
Data Protection and IP Within our dedicated Contracts and Technology Department we have market-leading expertise in negotiating distribution, reseller, agency and OEM agreements and software licences working with leading global organisations. We also provide assistance and advice concerning the protection and exploitation of intellectual property, and data protection regulations.
A company name ending with the word “Limited” or “Ltd” is required for incorporation of a private limited company. The name you select will obviously be determined by what best fits your business, however, there are some legal factors which should inform your decision. As a general rule, if someone in a similar field to yours is already using a particular business or organisation name, you should not use it, nor should you use a name that would be confusingly similar. Choose a name for your business that is distinctive, not one that is generic or similar to the name of another similar business. Consider protecting your chosen business name as a registered trade mark to protect it from infringement. By law, if a business (Business A) has developed a reputation in connection with particular goods or services which it offers, then Business A will be entitled to prevent any other business from representing that its goods and services are those of Business A by means of an action for passing off. Just as this protection can
be relied upon by Business A, it is available to other businesses against Business A, should it seek to pass-off. Similarly, you cannot use a logo or name which is similar to a registered trade mark, providing similar or identical goods or services, without running the risk of a trade mark infringement claim. Your chosen name must not contain any words deemed sensitive by Companies House (for example the word “holdings” can only be used where the company is in fact a holding company of one or more subsidiaries). Company names cannot be reserved in advance of incorporation. Check for registered trade marks within the EU here: https:// oami.europa.eu/eSearch/ Current company names can be checked here: https://beta. companieshouse.gov.uk/ Company name availability checker: https://beta.companieshouse.gov. uk/company-name-availability
Data protection legislation
General Data Protection Regulation (GDPR)
Any business operating in Northern Ireland and holding information from which living individuals can be identified will be subject to data protection legislation. This legislation regulates the collection, processing and disposal of personal data, and sets a higher standard of protection for sensitive personal data (for example, medical information).
The General Data Protection Regulation (GDPR) is a European Union (EU) Regulation intended to strengthen and unify data protection for all individuals within the EU. It also addresses the export of personal data outside the EU. The primary objectives of the GDPR are to give control back to citizens and residents over their personal data and to simplify the regulatory environment for international business by unifying the regulation within the EU.
Read the Data Protection Act here: http://www.legislation.gov.uk/ ukpga/1998/29/contents Some of the key obligations under data protection legislation include: • Developing a Privacy Policy: Notifying customers, users of your website and others as to how you will obtain, record, hold, use, disclose and erase their personal data.
• Drawing Up Employee Data Protection Policies: Providing the requisite information to employees through employee handbooks or employment contracts or a combination of both. • Register with the Information Commissioner’s Office or ICO: Unless you are exempt, all data controllers are currently required to register with the ICO via the website: https://ico.org.uk/fororganisations/register/ self-assessment/
The regulation comes into force on the 25th May 2018. In light of the UK’s impending Brexit, it is worth noting that this is likely to be one area of law which will remain unaffected by the UK’s departure, as any entity which trades in the European Union will be required to comply with GDPR.
The main changes introduced by the GDPR include: • Consent to processing must now be given explicitly and affirmatively. This will likely remove the ability to rely on silence or inactivity (such as failing to tick a box) to prove consent to the processing of data. Consent may also be withdrawn at any time, and must not be used as a precondition for a contract for which data processing isn’t necessary; • Data Processors (being those who are processing data on behalf of another entity) will now be subject to compliance requirements too; and • Subject Access Requests must be complied within 1 month, instead of within 40 days.
Intellectual property protection
Northern Ireland has very strict intellectual property laws, which fall into line with the wider UK intellectual property regime. These protect the names, ideas, products, designs and written word of businesses. In Northern Ireland, there are two main types of IP rights: • Unregistered • Registered Unregistered Rights, arise automatically, and include: • Copyright Protects original artistic expressions such as literary, artistic works or software code. Copyright subsists for the author’s life and usually for 70 years after their death. • Unregistered Design Rights Protects the appearance of a functional product based on certain designs for 10 years
after products based on that design were first sold, or 15 years after the design was created, whichever is the lesser period. • Goodwill or “Unregistered Trade Marks” Where a business has acquired “goodwill” in a brand from trading under that brand, it may have acquired unregistered trade mark rights. Registered Rights, these are granted on application to an official body such as the UK Intellectual Property Office. Key registered rights include: • Patents (time to allow for application: up to 5 years) A registered patent grants the owner the right to exclude others from making, using, or selling an invention, industrially applicable process or device based on the patent for 20 years from the filing date.
• Registered Trade Mark (time to allow for application: 4 months) A registered trade mark gives the owner the right to the exclusive use of the mark in connection with the goods or services for which it is registered. The same trade mark may be registered for different classes of goods or services. • Registered Designs (time to allow for application: 1 month) A registered design gives the owner the right to exclusive protection for its design, and can last for 25 years. The design is protected across all sectors and is not limited to the product to which it was originally applied. Before you start filing for patents, trade marks and designs, it will be important for you to research what has already been registered.
An advantage for Northern Ireland is the Commercial Court, a division of the High Court in Northern Ireland, which deals with commercial disputes, including IP disputes of significant value. A party can apply to have a case listed in the Commercial Court. The advantage of the Commercial Court is that its cases are regularly reviewed by the Commercial Judge who will case manage the litigation with a view to progressing all cases as expeditiously as possible. The Courts in Northern Ireland are becoming increasingly focused on early implementation of forms of Alternative Dispute Resolution such as Mediation.
Real Estate Property costs in Northern Ireland compare very favourably with other regions in the UK and the Republic of Ireland. Prime office rents are among the lowest in Western Europe. New, purposebuilt and fitted-out office space costs are more affordable within Northern Ireland. Our Real Estate Department, which is the largest dedicated commercial real estate team in Northern Ireland, regularly work with foreign businesses investing in Northern Ireland on all aspects of real estate acquisition and investment including portfolio management, strategic office relocations and commercial landlord and tenant work. Please download our real estate brochure for full details of our teams specialisms: http://issuu.com/tughans/docs/tughans-realestate-brochure?e=24016074/36464204 For further insight into real estate law in Northern Ireland and how it compares to your jurisdiction, please see the Northern Ireland section of the ‘International Comparative Legal Guide to: Real Estate 2017’ authored by our real estate team.
Buying or selling property In general, property in Northern Ireland is acquired by (i) buying it outright; (ii) leasing it; or (iii) buying the remaining term of an existing lease. Depending on the nature of the interest, the owner will have different rights and duties in relation to the land. It is not unusual for one piece of land to have several interests of different kinds, owned by different people at the same time, e.g. a landlord, a tenant and a sub-tenant. Northern Ireland operates a land registration system where a party’s interest in property is registered on a public register. This ensures that an owner’s interest in property is documented and protected to a certain degree.
It is important to consult a solicitor as soon as a suitable property has been identified so that appropriate searches and checks can be carried out. In the case of an existing building, a surveyor or engineer should also inspect the building at an early stage to ensure it is free from costly defects. To sell a property in Northern Ireland the parties enter into a detailed written contract to transfer the interest in the property from the seller to the buyer. The solicitor for the buyer will investigate the title and the planning status of the property to ensure that it is in order. Any problems with the title generally follow the property and so become the responsibility of the buyer, including environmental issues, secured liabilities or planning issues, so it is important to have such matters identified at the outset, allowing them to be properly dealt with.
If a financial institution is providing finance for the purchase of property, the property itself will usually form part of the security for the loan. The financial institution will usually require that its own solicitor checks the title to the property, but may rely on a certificate from the buyer’s solicitor. There is often a deposit of 10% paid on the signing of the contract, but this is a matter for commercial negotiation. The balance is paid on completion, which usually takes place a short period later or once any conditions, such as planning or building works, have been satisfied. When buying property, the buyer pays stamp duty land tax, a tax based on the value of the transaction. At present, for commercial property, the rates for acquisitions are as follows: (with
tax payable cumulatively at the rate for each band). (i) up to £150,000: 0%; (ii) £150,000 to £250,000 : 2%; (iii) £250,000 and above: 5%; and with the tax generally payable within 30 days of completion. There is no restriction on a foreign national or company purchasing or leasing property and there are various reliefs and exemptions that may reduce your liability, depending on the particular circumstances.
Planning permission
Commercial leases
Planning permission is required before an owner can develop buildings or land, or materially change their existing use. Applications are made to the local planning authority.
The rent payable for commercial property in Northern Ireland is usually quoted on a net basis, i.e. rent quoted per square foot or square metre will usually exclude toilets, columns, radiators, etc. Several other European countries measure on a gross basis.
Certain areas have designated zoning. Where planning applications are made in respect of such areas, they would generally be favourably received if the proposed use is in accordance with the plan We have a specialist planning team who can provide commercially astute guidance on regulatory issues, compliance standards and risk minimization. If required our construction team can offer specialist support to clients in the development of procurement strategies and in the management of construction risk and dispute avoidance.
In practice, commercial leases are most commonly granted for terms of 5-25 years. There is no automatic right to “break” the lease, prior to the end of the agreed term, although this is a matter for negotiation between the landlord and the tenant. Rent reviews normally occur at five yearly intervals and are generally upwards only, although some tenants are starting to get upwards or downwards reviews agreed with landlords.
Stamp duty land tax is also payable on the creation of a lease. It is calculated using a formula based on the level of rent and the length of the term which produces a figure known as the net present value. If this figure is up to £150,000 no tax is payable; the portion between £150,000 and £5,000,000 is payable at 1% and the portion of the value that exceeds £5,000,000 is payable at 2%. The occupier is generally liable for municipal rates unless an inclusive deal is reached with the landlord. There may be a VAT charge on rents payable under the lease, paid by the tenant, but this is usually recoverable where the tenant is registered for VAT and has full VAT recovery. Agreements for lease are separate contracts that landlords and tenants enter into prior to
completing a new lease, if the grant of the lease is conditional upon issues such as planning or building works, agreements for lease can also be used to document capital contributions paid by landlords to tenants by way of an inducement or to assist with initial fit-out costs.
Protection of Employees
Employment
Our Employment Department has over 70 years’ collective experience and a breadth of knowledge that spans Northern Ireland, the Republic of Ireland, and England and Wales. We advise on all aspects of employment law including recruitment, employment monitoring, disciplinary procedures, long-term absence and contract enforcement.
Northern Ireland has implemented European legislation that gives certain basic rights to employees. These basic rights are therefore similar to rights enjoyed by employees throughout the EU, however Northern Ireland still has its own unique domestic law, including the Employment Rights (Northern Ireland) Order 1996 (ERO), that is based on legislation and decisions of the courts. The protections enjoyed by employees include: • right to a written statement of the basic terms of his/ her employment; • protection against unfair dismissal after one year’s service; • paid holidays (5.6 working weeks); • protection against discrimination on grounds of race, gender, pregnancy or maternity, marital or civil partnership status, gender reassignment, religious belief or political
opinion, age, disability, sexual orientation and membership of the traveller community; • maternity/adoptive leave of up to 52 weeks (eligible employees on maternity leave are entitled to 6 weeks’ pay at 90% of their normal weekly earnings and 33 weeks’ pay at a set weekly rate or 90% of their normal weekly earnings whichever is lower; employees on adoptive leave are entitled to adoption pay for up to 39 weeks at a set weekly rate or 90% of their normal weekly earnings, whichever is lower). These rates are reviewed annually in April each year; and • protection of wages. Employees are entitled to a written statement of wages, contributions and deductions. The ERO generally prohibits unauthorised deductions from wages; • minimum hourly rate of pay (see below).
Fair Employment
Other equality legislation
Protection for Employers
In Northern Ireland, the Fair Employment and Treatment (Northern Ireland) Order 1998 prohibits discrimination, harassment or victimisation on the grounds of religious belief or political opinion. It imposes specific monitoring obligations on employers with 10 or more employees to:
This includes:
Employers can protect their business after an employee leaves employment by including post-termination restrictions (Restrictive Covenants) in the employee’s contract of employment. However, such restrictions will only be enforceable if the employer can show that:
• register with the Equality Commission for Northern Ireland, and monitor the community background, sex and occupation of their workforce; • conduct Article 55 reviews of the composition of their workforce every 3 years; and • take affirmative action to ensure fair participation of workers from different community backgrounds, where necessary.
• Sex Discrimination (Northern Ireland) Order 1976 (Amended 1988) • Equal Pay Act (Northern Ireland) 1970 (Amended 1984) • Disability Discrimination Act 1995 • Race Relations (Northern Ireland) Order 1997 • Employment Equality (Age) Regulations (NI) 2006
• it has a legitimate business interest that it is necessary to protect; and • the protection sought by the restriction is no more than is reasonable having regard to the interests of the parties and the public interest. Accordingly, restrictive covenants will be limited in terms of time, scope and geographical extent and will only be appropriate in respect of those employees who could damage the legitimate business interests of the employer, for example, senior executives or salesmen. If a restrictive covenant is wider than is necessary to protect an employer’s legitimate business interests or imposed
on employees with limited ability to damage the employer’s business, the restriction will likely be declared void by the courts as a restraint of trade and contrary to public policy. Restrictions will generally involve: • non-solicitation of clients/ prospective clients; • non-solicitation of key employees; • non-interference with suppliers; and • non-competition clauses. Employers can protect confidential information, over and above trade secrets, where an express confidentiality clause has been included in an employee’s contract of employment. Again, however, such clauses must be drafted with sufficient precision for the employer to demonstrate that the clause is necessary to protect its legitimate business interests and goes no further than is reasonable and necessary to protect those business interests following the termination of the employee’s contract.
Minimum Hourly Rates
Income Tax
The National Living Wage applies to workers aged 25 and over. Various rates of the National Minimum Wage apply to workers aged between 21-24 years old, between 18 and 20, under 18, and for apprentices. The national minimum wage applies to virtually all workers whether fulltime or part-time, temporary or casual. These rates are reviewed annually in April each year.
An employer is obliged to deduct income tax, called PAYE (Pay As You Earn) and National Insurance Contributions (NICs) at source from the employee’s monthly/ weekly salary.
Agricultural workers covered by agricultural wages laws are entitled to the Agricultural Minimum Wage rather than the National Minimum Wage or National Living Wage. No agricultural worker can be paid less than the National Minimum Wage. Some agricultural workers must be paid more than the National Minimum Wage because there is a higher Agricultural Minimum Wage rate. The current rates and additional information can be found through NI Direct. https://www.nidirect.gov.uk/ articles/national-minimumwage-and-living-wage
Working Time Regulations (Northern Ireland) 2016 Unless an employee has an opt out agreement, or an exemption applies, employees aged 18 or over cannot be forced to work more than 48 hours a week, on average. There are also rules on required rest periods, minimum annual leave and public holidays, and young workers. Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) and the Service Provision Change (Protection of Employment)
Regulations (Northern Ireland) 2006 (SPC Regulations).
Trade Unions
TUPE implements the EU Directive on Acquired Rights. Existing employees of a business that changes ownership (except for a share transfer) have a right to transfer to the new employer under the same terms and conditions of employment (both contractual and customary), with the exception of occupational pension provisions.
Every employee in Northern Ireland has the right to join a trade union but trade union membership is not compulsory.
The same applies under the Service Provision Change (SPC) Regulations which are commonly applied to work contracts for office cleaning, workplace catering or security where services are changed from one contractor to another, or brought in-house.
Under the Industrial Relations (Northern Ireland) Order 1992 trade unions can apply to the Industrial Court for recognition by an employer. If successful, the trade union may be recognised for collective bargaining relating to pay, holidays and hours.
Garden Leave
Pensions
Employers can also include a clause in an employee’s contract of employment permitting the employer to put the employee on garden leave when notice is given to terminate their employment.
Employers are required to provide a work based contributory pension for eligible job holders. Employer contributions rates will be 3% of salary, with employee rate at 5%. Employees may opt out of the scheme.
This will allow the employer to stop the employee performing their duties immediately whilst retaining the employee for the duration of their notice period. The aim of garden leave is to keep the employee out of the marketplace long enough for any information they have to go out of date or to enable the employee’s successor to establish themselves, particularly with customers, so as to protect goodwill.
These laws apply where a contract of employment is governed by the laws of Northern Ireland. Where the parties have not chosen the law, the contract may be governed by the laws of Northern Ireland if this is where the employee carries out their work. If the employee does not habitually carry out the work in or from one country, the contract is governed by the law of Northern Ireland if the business through which the employee is engaged is situated in Northern Ireland. However, where it appears from the circumstances that the contract is more closely connected with a different country, the law of that country applies.
Useful Links
Why Northern Ireland, Invest Northern Ireland https://www.investni.com/invest-innorthern-ireland.html?pod=why_ni
Investing in Belfast, Belfast City Council http://www.belfastcity.gov.uk/business/ investinginbelfast/investinginbelfast-about.aspx
Discover Northern Ireland – Northern Ireland Tourist Board https://discovernorthernireland.com/
Northern Ireland Business Information https://www.nibusinessinfo.co.uk/
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