UK employment law for first-time employers boils down to a few essentials: a written statement of employment particulars from day one, statutory rights to pay (National Minimum Wage), working hours (48-hour limit, opt-out), holiday (5.6 weeks), and protection from discrimination, unfair dismissal (after 2 years), and breach of contract. Get the basics right and most disputes are avoidable.

The reforms coming in 2026 (the Employment Rights Bill) shift unfair dismissal protection from "after 2 years" to "from day one" for most employees. Every first-time employer should be aware of what''s changing.

Before you hire — the legal foundations

Right to work check

A right to work check is the legal duty to verify every new hire has permission to do the work, before their first day. Three methods: online check via share code, manual document check (British/Irish), or IDVT. See our Right to work checks guide. Civil penalty for getting this wrong: £45-£60K per illegal worker.

Employment status

Determine whether the new person is:

• Employee — full employment rights (PAYE, NIC, all the statutory protections).
• Worker — limited rights (NMW, holiday, but not unfair dismissal, redundancy).
• Self-employed contractor — no employment rights; the relationship is contractual.

Getting status wrong (calling someone self-employed when HMRC considers them an employee) creates back-tax liability, NIC liability, and potential employment claims. For most full-time-equivalent roles in a small business, employee is the right status. IR35 rules apply to limited-company contractors providing services.

Set up PAYE

Register for PAYE with HMRC at least 4 weeks before the first payday. Get payroll software (Xero Payroll, BrightPay, Sage Payroll, FreeAgent Payroll, or run via your accountant).

Insurance

Employers'' Liability Insurance is legally required from the moment you have an employee — minimum £5m cover. Many small firms include £10m+ as standard. Failure to hold this insurance is a criminal offence with fines of £2,500 per day.

Day one — the written statement

Every new employee and worker (from day one of employment) must be given a written statement of employment particulars. This includes:

• Names of employer and employee.
• Start date.
• Job title or description of duties.
• Place of work.
• Rate of pay and payment frequency.
• Working hours, including days of the week.
• Holiday entitlement.
• Probationary period (if any).
• Notice periods.
• Pension provision.
• Other benefits.
• Disciplinary and grievance procedures (or where to find them).

You can issue a full Contract of Employment that contains the statement (most do). The deadline is day one, not "within the first month" as the old rule said.

The statutory rights every employee has

National Minimum Wage / National Living Wage

From April 2025: £12.21 per hour for ages 21+. Lower rates for 18-20, 16-17, apprentices.

Includes time spent travelling between job sites (for some workers), training time required by the employer, time on standby at the workplace. Excludes uniform costs, time on standby at home (in most cases).

Working hours (Working Time Regulations 1998)

• Maximum 48 hours per week averaged over 17 weeks. Employees can opt out individually with written agreement.
• Minimum 11 hours'' rest between working days.
• Minimum 24 hours'' rest per week (or 48 hours per fortnight).
• 20 minutes'' rest after 6 hours of work.

Holiday

• Statutory minimum: 5.6 weeks per year (28 days for someone working a 5-day week). Can include bank holidays.
• Holiday accrues from day one.
• Holiday pay must reflect normal earnings (including regular overtime, commission, etc., not just basic salary).
• Carry-over: in most cases use it or lose it within the leave year (limited statutory carryover for sickness, maternity, etc.).

Statutory pay rights

• Statutory Sick Pay (SSP): £116.75/week (2024/25) from day 4 of absence, for up to 28 weeks. Reform under the Employment Rights Bill removes the waiting days and lower-earnings threshold.
• Statutory Maternity Pay (SMP): 6 weeks at 90% of normal pay, then up to 33 weeks at the lower of 90% pay or £184.03/week.
• Statutory Paternity Pay: 2 weeks at the lower of 90% pay or £184.03/week.
• Statutory Shared Parental Pay: similar rate to SPP, up to 37 weeks shared between parents.

Discrimination protection (Equality Act 2010)

Nine protected characteristics: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, sexual orientation.

Discrimination is unlawful from the moment of recruitment (job adverts, interview questions, selection decisions) through to dismissal. Protection has no service requirement — applies from day one (and to job candidates too).

Unfair dismissal protection

Currently: most employees must have 2 years of continuous service to claim unfair dismissal at a tribunal. Some categories (whistleblowing, pregnancy, asserting statutory rights, trade union activity) are protected from day one.

Coming change under the Employment Rights Bill: unfair dismissal protection from day one for most employees, with a statutory probationary period (likely 6 or 9 months) during which dismissal is easier. Watch the implementation date — expected 2026-2027.

Disciplinary and dismissal procedure

To dismiss fairly:

1. A potentially fair reason — capability, conduct, redundancy, statutory restriction, or "some other substantial reason".
2. A fair procedure — investigate, give the employee a chance to respond, hold a meeting with a right to be accompanied, decide, communicate the decision, give a right of appeal.
3. The dismissal itself must be within the range of reasonable responses — proportionate to the offence or situation.

Skipping or rushing the procedure is the most common cause of unfair dismissal findings. The ACAS Code of Practice on Disciplinary and Grievance Procedures is the standard — failing to follow it adds 25% to any compensation award.

Costs of getting it wrong

• Unfair dismissal: typically £12-£30K compensation, capped at lower of one year''s pay or ~£105K. Tribunal hearings cost the business 10-50 days of management time.
• Discrimination: uncapped, including injury to feelings (typically £1,200-£58,700+ depending on severity).
• Wrongful dismissal: notice pay plus damages.
• Whistleblowing detriment: uncapped.

Tribunal claims are heard for free by the employee. The business bears its own legal costs (typically £15-£50K to defend).

What to do before your first hire

• Get a template employment contract — solicitor-drafted bespoke £500-£1,500, or template subscription (e.g. ACAS, peninsula) £100-£500.
• Set up employers'' liability insurance.
• Register for PAYE.
• Write a basic staff handbook covering: disciplinary procedure, grievance procedure, sickness, holidays, expenses, IT acceptable use, GDPR.
• Decide if you need an outsourced HR provider (Peninsula, Croner, Empire HR) — for under 5 employees, often not. For 5+, increasingly worth it.

What to do this month (if you''re a current employer)

• Audit existing employment contracts — is the written statement compliant? Updated for the 2020 changes?
• Review your disciplinary and grievance procedures against the current ACAS Code.
• Check your Employers'' Liability Insurance is in date with the right cover level.
• Prepare for the Employment Rights Bill reforms — particularly the change to day-one unfair dismissal protection.