HR Checklist for Small Businesses UK: Everything You Need (2026)

When you hire your first employee, you take on a raft of legal obligations that did not exist when it was just you. Many small business owners assume HR is something only larger companies need to worry about. In reality, employment law applies from employee number one. This checklist covers everything you need to have in place, whether you have 1 employee or 50.

Before you hire: essential setup

1. Employer's liability insurance

This is a legal requirement. You must have employer's liability insurance of at least £5 million from the day you hire your first employee. The certificate must be displayed in the workplace (or made easily accessible to employees). Failure to hold this insurance carries a fine of £2,500 per day.

2. Register as an employer with HMRC

You must register as an employer with HMRC before your first payday. This gives you a PAYE reference number, which you need to run payroll and submit Real Time Information (RTI) returns.

3. Right to work checks

Check every new employee's right to work in the UK before their first day. Keep copies of documents for the duration of employment plus two years.

Day one: employment contracts

Since April 2020, you must provide a written statement of employment particulars on or before the employee's first day. This document must include:

Job title and description
Start date
Pay rate and frequency
Working hours
Holiday entitlement (and whether bank holidays are included)
Place of work
Notice periods
Probation period details
Sick pay arrangements

Do not use a generic template downloaded from the internet without reviewing it carefully. It must reflect your actual terms.

Essential policies

There are certain policies that every UK employer should have, regardless of size:

Health and safety policy

If you have 5 or more employees, you must have a written health and safety policy. Even if you have fewer than 5, you still have a duty of care and should document your approach. Carry out a risk assessment for your workplace.

Disciplinary and grievance procedure

The ACAS Code of Practice requires employers to have a clear disciplinary and grievance procedure. While not having one is not illegal, failing to follow the ACAS Code can increase tribunal compensation by up to 25%.

Equal opportunities policy

The Equality Act 2010 protects employees from discrimination based on 9 protected characteristics. Having a clear equal opportunities policy demonstrates your commitment and provides a defence if a claim is made.

Data protection and privacy policy

Under GDPR and the Data Protection Act 2018, you must have a privacy notice for employees explaining what personal data you collect, why, and how it is stored. If you have specific monitoring in place (such as CCTV or email monitoring), this must be disclosed.

Leave and absence policy

Document your rules for annual leave requests, sick absence reporting, and any additional leave types you offer. This prevents disputes and ensures consistency.

Leave tracking

From your very first employee, you need a system for tracking annual leave, sick absence, and any other time off. Many businesses start with spreadsheets, but these quickly become error-prone as the team grows.

What you need to track:

Annual leave entitlement, used, and remaining balance
Sick absence (dates, reasons, fit notes)
Other leave types (compassionate, parental, TOIL)
Approval records showing who approved each request

Payroll

You must run payroll and submit RTI returns to HMRC on or before each payday. This includes calculating PAYE tax, National Insurance, student loan deductions, and pension contributions. Options for small businesses:

Do it yourself: Use HMRC Basic PAYE Tools (free, but limited to 9 employees)
Payroll software: Tools such as Xero, FreeAgent, or Sage handle calculations and RTI submissions
Outsource to an accountant: Many small businesses delegate payroll to their accountant for a monthly fee

Workplace pensions (auto-enrolment)

Every employer must provide a workplace pension scheme and automatically enrol eligible employees. Eligible employees are those aged 22 to state pension age who earn more than £10,000 per year. The minimum contribution rates are:

Employer: 3% of qualifying earnings
Employee: 5% of qualifying earnings (including tax relief)

You must set up your pension scheme and enrol eligible staff from their first day of employment. Popular providers for small businesses include NEST, NOW: Pensions, and The People's Pension.

Health and safety

All employers, regardless of size, must:

Carry out workplace risk assessments
Provide information and training to employees
Have arrangements for first aid
Report certain injuries, diseases, and dangerous occurrences (RIDDOR)
Display the Health and Safety Law poster (or provide each employee with a leaflet)

What you can DIY vs outsource

As a small business, you do not need to hire an HR manager. Here is a practical breakdown:

DIY with software: Leave tracking, absence management, onboarding checklists, employee records
DIY with templates: Employment contracts, basic policies (use ACAS templates as a starting point)
Outsource: Payroll (to your accountant or payroll provider), complex employment law questions (to an HR consultant or solicitor)
Consider outsourcing: Health and safety risk assessments if your workplace has specific hazards

How Leavely covers the basics

Leavely is built for small businesses that need to get HR right without hiring an HR team:

Leave tracking: Annual leave, sick absence, TOIL, compassionate leave, and custom types, all with automatic balance calculations.
Absence management: Bradford Factor scoring, return-to-work tracking, and absence pattern alerts.
Onboarding: Checklists ensure every new starter goes through the same steps before day one.
Employee profiles: Store contract details, working patterns, emergency contacts, and documents in one place.
Audit trail: Every action is logged, giving you evidence for compliance and disputes.