UK employment law has a reputation for complexity, but for most small businesses the day-to-day obligations are straightforward. This guide covers the rules that apply from the moment you take on your first member of staff — pay, hours, leave, sickness, and the major changes introduced by the Employment Rights Act 2025.
Direct answer
You don't need to be an employment lawyer to run a compliant small business. You need to know the six rules that apply to almost every employer, and where to go when something unusual happens. Use the key facts, step list and official source links on this page to confirm the decision before you spend money or register anything.
- National Living Wage
- £12.21/hr (2025/26)
- Holiday entitlement
- 28 days (incl. bank holidays)
- Statutory Sick Pay
- £116.75/week (2025/26)
- Probation period max
- 6 months (from April 2026)
Checklist
Quick checklist
- Check your pay rates comply with the current NMW/NLW
- Provide a written statement of particulars on day one
- Register as an employer with HMRC before first payday
- Set up Employer's Liability insurance (legal requirement)
- Enrol eligible staff in a workplace pension
- Keep records of working hours, holiday taken, and sick leave
- Familiarise yourself with the Acas Code of Practice on discipline
Section 01
National Minimum Wage and National Living Wage
Every employer must pay at least the National Minimum Wage (NMW) or National Living Wage (NLW) depending on the worker's age. These are the legal floors — you cannot pay less, regardless of what the worker agrees to.
- National Living Wage (aged 21+): £12.21 per hour from April 2025.
- 18–20 rate: £10.00 per hour from April 2025.
- 16–17 rate and apprentice rate: £7.55 per hour from April 2025.
- Rates are reviewed annually each April — check gov.uk/national-minimum-wage-rates for the current figures.
- The NMW applies to workers and employees, including part-time, casual, and zero-hours workers. It does not apply to the genuinely self-employed.
- Failing to pay the NMW is a criminal offence. HMRC enforces compliance and can issue penalties of up to 200% of arrears.
Section 02
Working time rules
The Working Time Regulations 1998 set limits on how long workers can work and entitle them to rest breaks. Most workers can opt out of the 48-hour weekly limit, but rest entitlements cannot be waived.
- Maximum average working week: 48 hours (averaged over 17 weeks). Workers can opt out in writing.
- Daily rest: 11 consecutive hours between working days.
- Weekly rest: 24 consecutive hours per week (or 48 hours per fortnight).
- Rest breaks: 20-minute break for shifts over 6 hours.
- Night workers: average of no more than 8 hours per night shift; free health assessments must be offered.
- Young workers (under 18): stricter limits apply — maximum 8 hours per day, 40 hours per week, no night work.
Section 03
Holiday entitlement
All workers (not just employees) are entitled to paid annual leave from their first day of work. The statutory minimum is 5.6 weeks per year, which equals 28 days for a full-time worker working 5 days a week.
- Full-time workers: 28 days per year (can include the 8 UK bank holidays).
- Part-time workers: pro-rated — a worker doing 3 days a week gets 16.8 days.
- Irregular hours and part-year workers: from April 2024, holiday accrues at 12.07% of hours worked each pay period.
- Holiday pay must reflect normal pay, including regular overtime and commission.
- Workers can carry over up to 28 days if they could not take leave due to sickness or family leave.
- You cannot pay workers in lieu of holiday except on termination.
Section 04
Statutory Sick Pay
Statutory Sick Pay (SSP) is the minimum you must pay employees who are off sick. From April 2026, the rules changed significantly under the Employment Rights Act 2025.
- SSP rate: £116.75 per week (2025/26).
- From April 2026: SSP is payable from day one of sickness (the previous 3-day waiting period has been abolished).
- From April 2026: the lower earnings threshold has been removed — all employees qualify regardless of earnings.
- SSP is payable for up to 28 weeks of sickness absence.
- You can offer contractual sick pay above SSP — this is common for attracting and retaining staff.
- Employees must notify you of sickness (check your contract for the required notice period and method).
Section 05
Written statement of employment particulars
From April 2020, all employees and workers must receive a written statement of their key terms on or before their first day of work. This is not optional — it is a legal requirement.
- Must be provided on day one (not within 8 weeks as was previously the case).
- Must include: names of employer and employee, start date, pay and pay period, hours, holiday entitlement, job title, place of work, notice periods, and sick pay.
- Additional particulars (pension, disciplinary procedure, collective agreements) can be provided within 2 months.
- Failing to provide a written statement entitles the employee to claim compensation at an employment tribunal.
- Use our free employment contract template as a starting point.
Section 06
Key changes from the Employment Rights Act 2025
The Employment Rights Act 2025 introduced the most significant changes to UK employment law in a generation. Several provisions took effect in April 2026.
- Probation periods: capped at 6 months from April 2026. Employees in their probation period have a right not to be unfairly dismissed, but the employer can follow a lighter-touch dismissal process.
- Day-one unfair dismissal rights: from April 2026, employees have the right not to be unfairly dismissed from their first day (previously required 2 years' service for most claims).
- Statutory Sick Pay: payable from day one, no lower earnings threshold (see above).
- Zero-hours contracts: workers on zero-hours contracts will have the right to request a guaranteed-hours contract after a qualifying period.
- Fair Work Agency: a new enforcement body replacing HMRC's NMW enforcement, the Employment Agency Standards Inspectorate, and the Gangmasters and Labour Abuse Authority.
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