HR for founders in the United Kingdom
Reviewed by Mellow Editorial Team, HR & payroll content team
Running HR properly from the start protects your business, keeps you compliant and builds the kind of workplace that retains good people. Here is what every UK founder needs to know.
Get the employment relationship right before day one
The first decision is whether someone is an employee, a worker or self-employed contractor. Getting this wrong is expensive. HMRC and employment tribunals look at the reality of the arrangement, not just what a contract says. If someone works regular hours under your direction, uses your equipment and cannot send a substitute, they are almost certainly an employee regardless of what the invoice says.
Employees have the broadest rights: written terms from day one, statutory sick pay, holiday entitlement, auto-enrolment pension and protection against unfair dismissal. Workers get a thinner set of rights but still have entitlements around pay and holiday. Genuine self-employed contractors sit outside most of this, but the bar to qualify is higher than many founders assume.
The Employment Rights Act 2025 has strengthened day-one rights further, so the buffer you might once have relied on during early employment no longer offers the same protection.
Written contracts and policies you actually need
You must give employees a written statement of particulars on or before day one. This is a legal requirement, not optional. It should cover pay, hours, holiday entitlement, notice periods, job title and where work is performed.
Beyond the contract, a small number of written policies are either legally required or practically essential:
- Disciplinary and grievance procedures — required by the Acas Code of Practice; you will need them if a dispute reaches a tribunal
- Health and safety policy — mandatory once you have five or more employees
- Data protection policy — required under UK GDPR, particularly relevant once you handle employee personal data
- Equality and anti-harassment policy — not strictly mandated in isolation, but strong protection if a claim arises
You do not need a 60-page HR manual on day one. A few clear, honest documents are far more useful than dense boilerplate nobody reads.
Payroll and tax obligations from the first payday
Every employer must register with HMRC before running payroll for the first time. Under Real Time Information (RTI), you submit a Full Payment Submission (FPS) on or before each payday — not monthly after the fact. Missing this creates penalties and, more importantly, gaps in employees' tax records.
The numbers you need to hold in your head:
- Employees pay income tax at 20% on earnings above the £12,570 personal allowance, rising to 40% and then 45% at higher thresholds
- Employees pay National Insurance at 8% on earnings between the lower and upper earnings limits, then 2% above
- You pay employer NI at 13.8% on earnings above the secondary threshold — this is a real employment cost that catches many founders off guard when building their first salary offer
- You must auto-enrol eligible employees into a qualifying pension scheme, contributing at least 3% of qualifying earnings, with employees contributing at least 5%
You need to issue a P60 to every employee by 31 May after each tax year end, and submit P11Ds by 6 July to report benefits in kind.
If you are growing fast or operating across multiple countries, using a payroll provider rather than running this manually reduces error risk significantly. How Mellow runs payroll across six countries on one platform gives a practical picture of what that looks like at scale.
Holiday, sick pay and leave entitlements
Full-time employees working a five-day week are entitled to 5.6 weeks of statutory annual leave — 28 days including bank holidays. Part-time employees receive the same entitlement pro-rated to their hours.
Statutory Sick Pay applies once an employee meets the earnings threshold and has been ill for a qualifying period. Statutory family leave — including maternity, paternity, shared parental and adoption leave — also applies, with varying qualifying conditions and rates of pay.
You are not obliged to offer more than the statutory minimums, but many founders find that enhanced policies, particularly on sick pay and parental leave, make a genuine difference to the quality of candidates you can attract without spending more on base salary.
Managing performance and exits without the legal exposure
Employment tribunals are stressful and expensive. Most claims stem from a failure to follow a fair process rather than the underlying decision being wrong. This means the investment in proper procedures pays for itself many times over.
For performance or conduct issues, follow the Acas Code: investigate, communicate concerns in writing, hold a formal meeting and give a right of appeal. Keep records. If you later need to dismiss someone, you want a clear paper trail showing you acted reasonably.
For redundancy, the process is equally important: genuine redundancy, a pool of affected roles, meaningful consultation and selection criteria that are objective. Employees with two or more years of continuous service are entitled to a statutory redundancy payment calculated on age, length of service and weekly pay.
Founders who build these habits early — rather than retrofitting them during a crisis — consistently find employment law far less frightening in practice.
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