HR for a business with 1–10 employees in the United Kingdom
Reviewed by Mellow Editorial Team, HR & payroll content team
Running HR for a micro-business in the UK means handling real legal obligations with limited time and no dedicated HR team. Here is what you actually need to have in place.
The paperwork you must have before anyone starts
Every employee needs a written statement of particulars on or before their first day. This is a legal requirement, not a nicety. It must cover job title, pay, working hours, holiday entitlement and notice periods, among other items.
You also need to check the right to work in the UK for every new starter. Keep a copy of the document you checked and the date you checked it. If you skip this and someone is not entitled to work in the UK, the penalties are severe.
If you are using a probationary period, state its length and terms in the contract. Under the Employment Rights Act 2025, employees gain stronger day-one rights, so do not assume a probation period removes your obligations from the outset.
Payroll and deductions: what you owe HMRC
You need to register as an employer with HMRC before your first payday. Once you are set up, payroll runs under the Real Time Information (RTI) system. You submit a Full Payment Submission (FPS) on or before each payday — not monthly, not whenever is convenient, but every single pay run.
The numbers that matter for 2026/27:
- Employees pay no income tax on the first £12,570 they earn (personal allowance), then 20% up to the basic-rate limit, 40% above that, and 45% at the additional rate.
- Employees pay National Insurance at 8% on earnings within the standard band, then 2% above the upper earnings limit.
- You pay employer National Insurance at 13.8% on earnings above the secondary threshold (category A employees).
At the end of the tax year you issue P60s to all employees still on your payroll by 31 May. If you provide benefits in kind — a company car, private medical insurance, interest-free loans above a set threshold — you report them on a P11D by 6 July.
Getting payroll wrong is one of the most common and costly mistakes a small employer makes. If numbers are not your strength, a payroll bureau or a platform like how Mellow runs payroll across six countries can remove the manual risk.
Auto-enrolment pensions
Once you have eligible workers, pension auto-enrolment applies to you regardless of your company size. Eligible workers are generally aged 22 to state pension age, earning above the earnings trigger.
The minimum contributions are:
- Employer: 3% of qualifying earnings
- Employee: 5% of qualifying earnings
You must choose a qualifying pension scheme, enrol eligible staff automatically, write to them explaining their rights, and keep records. Workers can opt out, but you must re-enrol them roughly every three years.
Missing auto-enrolment deadlines attracts fixed and escalating penalties from The Pensions Regulator. Check your staging or duties start date — for new employers it is typically your first payday.
Holiday, sick pay and leave entitlements
Full-time employees working five days a week are entitled to 5.6 weeks of statutory annual leave per year, which works out to 28 days including bank holidays. Part-time workers get a pro-rata amount. You can choose to include bank holidays within that 28-day entitlement or offer them on top — just be consistent and state it clearly in the contract.
Statutory Sick Pay applies once an employee meets the qualifying conditions. Statutory maternity, paternity, adoption and shared parental pay also apply. You do not need to offer more than the statutory minimums, but if you do, document it and apply it consistently.
For a micro-business, absence can have a significant operational impact. A short sickness absence policy — even a one-page document covering who employees call, when, and what happens on return — sets expectations and reduces ambiguity.
Keeping records and staying compliant
As an employer you have ongoing record-keeping obligations. These include payroll records, right-to-work checks, working time records, and any disciplinary or grievance correspondence. Most employment records should be kept for at least six years; right-to-work documents should be retained for two years after employment ends.
Under UK GDPR you must handle employee personal data lawfully. For a small employer this generally means having a brief privacy notice for employees explaining what data you hold and why.
With a team of one to ten, informal conversations can replace formal processes — until something goes wrong. Having a written disciplinary and grievance procedure in place (even a short one that follows the ACAS Code of Practice) protects both the business and the employee if a dispute arises. ACAS guidance is free and written for employers of any size.
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