What HR Does a Small Business Legally Need in the UK?

You don't need an HR department to employ people, but you do need to get certain things right. Some are legal requirements from the moment you take on your first employee. Others aren't strictly required by law, but a tribunal would expect to see them. Here's what a UK small business needs, in plain English and roughly in the order you'll need it.

Before someone starts work

The first legal requirement comes before anyone does a day's work: a right to work check. You must check that every new starter is allowed to work in the UK, following the Home Office guidance, and keep a copy of their documents or the result of the online check. Do it for everyone, not just people you think might need a visa, because checking only some people can lead to a discrimination claim. Getting it wrong is expensive: the civil penalty for employing someone without the right to work can be up to £60,000 per worker.

You'll also need to register as an employer with HMRC so you can run PAYE, and take out employers' liability insurance from the first day you employ someone. The law requires at least £5 million of cover from an authorised insurer, and you can be fined for every day you're not insured. Very few small businesses are exempt, so check with your insurer if you're unsure.

On day one

Every employee and worker must receive a written statement of their main terms on or before their first day. It has to cover things like pay, working hours, holiday, notice, where they'll work and any probation period. Some details, such as pensions and where to find your disciplinary and grievance procedures, can follow within two months. In practice, a good employment contract covers all of this in one document.

From their first payday, staff must also receive an itemised payslip. If their pay varies with the hours they work, the payslip must show those hours.

Pay, pensions and time off

You must pay at least the National Minimum Wage or National Living Wage for each worker's age. The rates rise every April, so check GOV.UK each year and keep pay records for six years.

Under automatic enrolment, you must assess your staff, put eligible workers into a workplace pension, and pay employer contributions of at least 3% of their qualifying earnings. Within five months of taking on your first employee, you also need to complete a declaration of compliance with The Pensions Regulator. Many new employers miss this step.

Staff working full time are entitled to 5.6 weeks' paid holiday a year, which can include bank holidays, and staff who work part time get the same in proportion to their hours. Since April 2026, you must keep records of holiday and holiday pay for six years. The Working Time Regulations also limit the average working week to 48 hours unless someone opts out, and give staff rest breaks and rest periods.

When staff are off sick, Statutory Sick Pay has been payable from the first day of sickness since April 2026, and lower earners now qualify too. Your staff are also entitled to family leave, including maternity, paternity, adoption, shared parental, parental, carer's and neonatal care leave. Paternity leave and unpaid parental leave became rights from the first day of employment in April 2026. Every employee can also ask for flexible working from their first day.

Health, safety and data protection

Every business must assess the health and safety risks to its staff and act on them. Once you have five or more employees, you must also write down the significant findings of your risk assessment and have a written health and safety policy. You must display the "Health and safety law" poster, or give staff the equivalent leaflet, and have suitable first aid arrangements. If you run your own premises, you'll also need a fire risk assessment.

You'll hold personal information about your staff, so data protection law applies. Staff need a privacy notice explaining what you hold and why. Keep their data secure, and don't keep it longer than you need to. Most organisations that handle personal data must also pay the Information Commissioner's Office (ICO) data protection fee each year, unless they're exempt.

Policies and procedures

By law, you must have disciplinary and grievance procedures and tell staff where to find them. Follow the Acas Code of Practice when you use them: if a case reaches a tribunal and you've unreasonably failed to follow the Code, any award can be increased by up to 25%.

Beyond that, the law doesn't list every policy you need. But without some key ones, it's very hard to show you've met your duties. From 30 October 2026, you must take all reasonable steps to prevent sexual harassment, and a clear harassment policy is the foundation of that. Most small businesses should also have policies on sickness absence, family leave, flexible working, data protection, equal opportunities and, increasingly, the use of AI at work. An employee handbook is the simplest way to keep them all in one place.

What's coming next

The Employment Rights Act 2025 is still being phased in. From 1 January 2027, employees can claim unfair dismissal after six months, so it's worth reading our guide to running probation periods from 2027. Our guide to the new harassment duty explains what changed in October 2026, and our flexible working guide covers the changes expected in 2027. For the full timetable, see our Employment Rights Act 2025 guide.

Your HR essentials checklist

• Right to work checks for every new starter, with copies kept
• Registered with HMRC as an employer
• Employers' liability insurance of at least £5 million
• A written statement of terms or contract issued on or before day one
• Itemised payslips, and pay at or above the minimum wage
• Staff enrolled in a workplace pension and declaration of compliance completed
• Holiday, sick pay and family leave handled correctly, with records kept
• A health and safety risk assessment, and a written policy if you have five or more staff
• A staff privacy notice, and the ICO fee paid if required
• Disciplinary and grievance procedures that follow the Acas Code
• A harassment policy that covers customers and other third parties
• An employee handbook that brings your policies together

How Floreo HR can help

If you're not sure whether you've got everything covered, our free HR Health Check will tell you. We'll review your contracts, policies and processes, highlight any gaps, and give you clear, prioritised recommendations. There's no pressure and no sales pitch. If you need contracts, policies or a handbook, we can write them for you, tailored to your business.

We support businesses across Hull, East Yorkshire, York, Leeds, Harrogate and Sheffield. Call 01482 765481 or get in touch.

This article is general guidance based on the law as at October 2026. It isn't legal advice, and rates and rules change regularly. Check the latest position on GOV.UK and Acas, or speak to us about your circumstances.