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
- £12.71/hr (age 21+, from April 2026)
- Holiday entitlement
- 28 days (incl. bank holidays)
- Statutory Sick Pay
- £123.25/week or 80% of average earnings, whichever is lower (2026/27)
- Employment changes
- Check current GOV.UK and Acas guidance
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+): £12.71 per hour from 1 April 2026.
- 18–20 rate: £10.85 per hour from 1 April 2026.
- 16–17 rate and apprentice rate: £8.00 per hour from 1 April 2026.
- 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 a statutory payment for eligible employees who are off sick. Eligibility, qualifying days and the amount payable depend on current legislation and HMRC guidance, so use the official calculator for a live case.
- 2026/27 weekly SSP rate: £123.25 or 80% of the employee’s average weekly earnings, whichever is lower.
- Use the official SSP calculator to determine qualifying days, the payable amount and any case-specific exclusions.
- Do not assume all workers or every absence qualifies; check current eligibility guidance before payroll is run.
- 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
Keep employment-law changes under review
Employment law changes can be phased, amended and subject to detailed regulations. Rather than rely on generic implementation dates, check current GOV.UK and Acas guidance before changing contracts, absence policies, dismissal processes or zero-hours arrangements.
- Check the current statutory guidance before relying on a probation clause or a qualifying-service rule.
- Update written terms, payroll processes and manager training when a relevant change takes effect.
- Use Acas or a qualified employment adviser for disciplinary, dismissal, sickness and discrimination cases.
Partner offers
Before you go — claim your reader offers
Two offers we recommend to every UK founder. Codes are exclusive to readers of this guide.
Business banking
Reader offerTide Business Account
Up to £200 cash
£75 after at least £100 of eligible Tide card transactions in 30 days, plus £125 when the separate Tide Instant Saver milestone is met.
REFER200New customers only. Terms, eligibility and payment timing apply.
Business credit card
Reader offerCapital on Tap Business Credit Card
7,500 bonus points
7,500 bonus points after a completed qualifying card or cash transaction in the three months after approval, subject to Capital on Tap’s current partner terms.
SETTINGUP18+, UK-resident qualifying company applicants. Credit subject to status and affordability.
18+ and UK requirements apply. Tide: £75 after at least £100 of eligible Tide card transactions in 30 days, plus £125 when the separate Tide Instant Saver milestone is met. New customers only. Terms, eligibility and payment timing apply. Capital on Tap: 7,500 bonus points after a completed qualifying card or cash transaction in the three months after approval, subject to Capital on Tap’s current partner terms. 18+, UK-resident qualifying company applicants. Credit subject to status and affordability. We may receive a commission if you sign up; it does not change the provider’s offer or pricing.
Common questions