Essential HR Policies Every Small Business Needs in the UK

If you’re running a small business and employing people, you probably don’t need a 50-page HR manual.

But you do need some basic HR policies.

The problem is knowing which ones actually matter.

There are hundreds of HR policy templates available online, and it’s very easy to end up with a folder full of documents that nobody has ever read, don’t reflect how your business actually works and haven’t been updated since 2019.

The better approach is to build your HR policies around your business, your people and the risks you actually face.

And with the Employment Rights Act 2025 introducing significant changes throughout 2026 and 2027, now is a particularly good time for small businesses to review their HR foundations.

So, which HR policies does a small business actually need?

There isn’t one definitive list that applies to every business.

A five-person office-based consultancy doesn’t need exactly the same HR policies as a 30-person retail business or a manufacturing company.

However, there are some policies that form the core of a sensible SME HR framework.

1. Disciplinary Policy

A disciplinary policy explains how your business deals with concerns about employee conduct or behaviour.

It’s one of the fundamental HR policies most employers should have in place.

It provides a framework for dealing with issues consistently and gives employees clarity about what happens if there are concerns about their conduct.

For small businesses, this doesn’t need to be an enormous document.

It just needs to give managers and employees a clear framework to work from.

2. Grievance Policy

Your employees need to know what they can do if they have a concern about something happening at work.

A grievance policy provides a formal route for employees to raise concerns and for the business to investigate and respond appropriately.

This becomes particularly important as businesses grow and informal conversations are no longer enough to manage every workplace issue.

Your grievance process should also work alongside your approach to workplace conflict, harassment and discrimination.

3. Sickness Absence Policy

Sickness absence is one of those things that every employer will eventually have to deal with.

A basic sickness absence policy should give employees and managers clarity around reporting absence, keeping in touch, medical evidence and returning to work.

This is particularly important following the changes to Statutory Sick Pay.

From 6 April 2026, SSP became payable from the first day of sickness absence and the Lower Earnings Limit was removed.

That means businesses should make sure their contracts, payroll processes and absence arrangements all reflect the current rules.

4. Holiday Policy

Holiday is another area where having a clear process makes life considerably easier.

Your policy should sit alongside the contractual holiday entitlement in your employment contracts and explain how employees request and take annual leave.

There is an additional reason to review this now.

From 6 April 2026, employers have been required to keep records of annual leave and holiday pay for at least six years.

A good holiday process therefore isn’t just about employees knowing how to book time off. It’s also about making sure the business can demonstrate that holiday is being properly managed.

5. Flexible Working Policy

Flexible working has become a core part of modern HR.

Employees already have a day-one right to request flexible working, and the Employment Rights Act 2025 will strengthen the process further in 2027. Employers will need to explain why a refusal is reasonable and identify the applicable statutory ground or grounds for refusing the request.

For SMEs, a clear flexible working policy can help managers understand how requests should be handled consistently.

It can also make the process much less daunting when an employee asks:

“Can I change my working hours?”

6. Family Leave Policy

Your family leave arrangements should cover the different statutory rights that may apply to your employees.

This includes areas such as:

• Maternity leave

• Adoption leave

• Paternity leave

• Shared parental leave

• Parental leave

• Parental bereavement leave

And there are already important changes to consider.

From 6 April 2026, paternity leave and ordinary parental leave became day-one rights.

The Employment Rights Act 2025 will also introduce a new statutory right to bereavement leave during 2027, including in circumstances involving pregnancy loss.

This is therefore an area where businesses should make sure their existing family leave policies are not simply sitting untouched.

7. Equality, Diversity and Inclusion Policy

You don’t need a complicated 40-page diversity strategy to treat people fairly.

But your business should have a clear approach to equality, discrimination and inclusion.

That should cover the principles that apply to:

• Recruitment

• Promotion

• Pay

• Performance

• Training

• Conduct

• Dismissal

It should also help managers understand that discrimination protections apply from the beginning of employment.

8. Sexual Harassment Policy

This one deserves particular attention.

The legal duty on employers to take reasonable steps to prevent sexual harassment came into force in October 2024.

The Employment Rights Act 2025 strengthens those obligations further.

From October 2026, employers will need to take all reasonable steps to prevent sexual harassment, and employers can become liable for harassment by third parties such as customers or clients unless they have taken all reasonable steps to prevent it.

Sexual harassment disclosures will also have additional whistleblowing protection from April 2026.

For businesses with customer-facing employees, this is particularly important.

A shop, restaurant, hotel or consultancy dealing with clients can all face very different risks.

A standalone sexual harassment policy can therefore be a useful part of your HR framework, alongside manager training and practical measures to prevent harassment.

9. Whistleblowing Policy

Whistleblowing is another area where SMEs sometimes think:

“We’re too small to need that.”

That’s not necessarily the case.

Employees and workers may have legal protection when making certain protected disclosures.

And the Employment Rights Act 2025 has specifically strengthened protection for workers who make disclosures relating to sexual harassment.

A whistleblowing policy gives employees a clear route for raising serious concerns and helps the business understand how those concerns should be handled.

10. Menopause Policy or Menopause Support Framework

This is an area that has become increasingly important for employers.

The Employment Rights Act 2025 introduces measures around gender equality and menopause action plans, although the mandatory requirements will apply to larger employers rather than every SME.

From April 2026, organisations with 250 or more employees have been able to publish voluntary action plans covering gender equality and support for employees experiencing menopause, with mandatory action plans expected in 2027.

For a small business, that doesn’t mean you suddenly need a complicated statutory menopause policy.

But it is worth considering whether your existing wellbeing, sickness absence, flexible working and reasonable adjustment arrangements properly support employees experiencing menopause.

For some businesses, a standalone menopause policy may make sense. For others, integrating the principles into existing policies may be more appropriate.

11. Performance Management and Capability Policy

Not every performance problem is misconduct.

Sometimes an employee is trying their best but isn’t meeting the requirements of their role.

That’s where capability and performance management come in.

This is particularly important with the reduction in the unfair dismissal qualifying period to six months from 1 January 2027.

SMEs should be thinking now about how managers identify performance concerns, provide feedback and support improvement.

This doesn’t mean turning every performance conversation into a formal process.

It means having a sensible framework when informal management isn’t enough.

12. Probation Policy

Probation deserves its own consideration as the unfair dismissal rules change.

From January 2027, ordinary unfair dismissal protection will generally apply after six months’ service rather than two years.

That makes the first few months of employment increasingly important for employers.

A probation policy can help managers understand how new employees should be assessed and when reviews should take place.

For many SMEs, a three-month probation with meaningful reviews can be a sensible approach, although the appropriate length will depend on the role.

We’ve written more about this in our guide to managing probation ahead of the 2027 changes.

13. Data Protection and Privacy

Your HR records contain some of the most sensitive information your business holds.

Employee data might include:

• Addresses

• Bank details

• National Insurance information

• Sickness information

• Performance records

• Disciplinary records

• Right to work evidence

Your HR framework should therefore work alongside your wider data protection arrangements.

You don’t necessarily need a document called “Employee Data Protection Policy” sitting separately from everything else, but employees should understand how their personal information is handled and where they can find the relevant information.

14. Health and Safety

Health and safety is another area where the right approach depends heavily on your business.

An office-based business will have different risks from a warehouse, manufacturing site or retail premises.

Your HR policies should therefore work alongside your health and safety arrangements rather than trying to cover every risk in one generic HR document.

For some businesses, that could include policies or procedures covering:

• Health and safety

• Lone working

• Manual handling

• Display screen equipment

• Workplace violence

• Personal protective equipment

The important thing is to identify what actually applies to your workforce.

What about the new Employment Rights Act 2025 changes?

One of the easiest mistakes to make is assuming that every new employment right means you need to create a brand-new policy.

You don’t.

The Employment Rights Act 2025 introduces changes across areas including:

• Sick pay

• Paternity and parental leave

• Bereavement leave

• Flexible working

• Sexual harassment

• Whistleblowing

• Unfair dismissal

• Pregnancy and maternity protection

• Zero-hours and low-hours contracts

• Shift notice and cancelled shifts

• Fire and rehire

• Trade union rights

Many of these changes will require employers to review existing policies and processes, rather than simply downloading another document and putting it in a folder.

That’s an important distinction.

So what should a small business actually have?

If you’re a typical SME with a relatively straightforward workforce, your core HR policy framework might look something like this:

Core policies

• Disciplinary Policy

• Grievance Policy

• Sickness Absence Policy

• Holiday Policy

• Flexible Working Policy

• Family Leave Policy

• Equality, Diversity and Inclusion Policy

• Sexual Harassment Policy

• Whistleblowing Policy

• Health and Safety Policy

• Data Protection / Privacy arrangements

Policies to consider as your business grows

• Performance Management / Capability Policy

• Probation Policy

• Menopause Policy

• Remote and Hybrid Working Policy

• Expenses Policy

• Social Media Policy

• Alcohol and Substance Misuse Policy

• Recruitment Policy

• Redundancy Policy

• Redundancy and Restructure Procedure

• Training and Development Policy

And then there are policies that may be highly relevant to particular businesses but completely unnecessary for others.

A manufacturing business might need detailed workplace safety arrangements.

A retail business might need policies covering lone working, cash handling or customer aggression.

A professional services business might place greater emphasis on confidentiality, data protection and professional standards.

That’s why your HR policy library should be built around your business, not someone else’s.

Don’t put everything in the employee handbook

One common mistake is trying to cram every HR policy into one enormous employee handbook.

A handbook can be a great place to bring together key information for employees.

But individual policies still have their place.

It is much easier to update a flexible working policy, for example, than to rewrite a 70-page handbook every time employment law changes.

It also makes it easier for employees to find the information that is relevant to them.

How often should HR policies be reviewed?

There isn’t a magic date when every HR policy needs to be rewritten.

But policies should be reviewed when:

• Employment law changes

• Your business changes

• You introduce new working arrangements

• You start employing different types of workers

• A workplace issue highlights a gap

• Your existing policy no longer reflects what actually happens

The Employment Rights Act 2025 is a particularly good reason to review your HR policies now.

Acas recommends that employers focus on updating policies, improving record keeping, supporting managers and communicating clearly with employees as the reforms come into force.

The FoundrKit approach

We don’t think small businesses need a giant HR policy library just for the sake of having one.

You need the right documents for your business, at the right time.

That’s why FoundrKit’s HR document packs are organised around the problems small businesses actually face.

Whether you’re:

Hiring your first employee

Start with the First Hire Kit, covering the essential documents you need to recruit and manage your first employee.

Building your HR foundations

The People Ops Kit helps you put the basic HR infrastructure and processes in place as your team grows.

Preparing for the Employment Rights Act 2025

The Employment Rights Act 2025 Bundle brings together the key policies, guidance and documents SMEs need to prepare for the changes.

Improving performance management

The Performance Management Kit gives you the documents and guidance to manage performance, probation and capability more consistently.

Building a more supportive workplace

Our specialist packs cover areas such as duty of care, neurodiversity, menopause and remote working, helping you address specific people issues without buying an enormous generic HR manual.

The whole point is to avoid paying for documents you don’t need.

The bottom line

There is no prize for having the biggest HR policy folder.

For a small business, good HR is about having the right foundations.

Start with the essentials.

Keep your policies clear.

Make sure managers understand them.

Review them when your business or the law changes.

And don’t create a policy simply because you found a template online.

The Employment Rights Act 2025 makes this even more important. With changes being introduced throughout 2026 and 2027, SMEs should be reviewing their existing HR framework rather than waiting until a new right comes into force and discovering that their policies are out of date.

Good HR isn’t about having more paperwork. It’s about having the right paperwork.

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