Running a business in the UK means carrying a fair amount of legal weight on your shoulders, whether you employ two people or two hundred. Getting employment law right is not just about avoiding tribunal claims, though that matters. It is about building a workplace where people know where they stand and where you, as the business owner or manager, can make decisions with confidence.

This guide walks through the areas employers most often ask about: the differences between employees, workers and contractors, the contracts you need to have in place, the HR policies that should sit behind those contracts, and the process to follow when an employment relationship ends. The rules change often, so treat this as a starting point rather than the final word on any particular question.

Overview

Employment law in the UK is the body of rules that governs the relationship between people who do work and the organisations that pay for it. It draws from several sources, including the Employment Rights Act 1996, the Equality Act 2010, the Working Time Regulations 1998, the National Minimum Wage Act 1998 and a steady stream of case law from tribunals and higher courts.

On top of statute, the Acas Code of Practice on Disciplinary and Grievance Procedures shapes what tribunals expect from employers in practice. For employers, the law covers recruitment, written terms, pay, working hours, holiday, sickness, family leave, health and safety, data protection for staff records, discrimination, discipline and dismissal.

Different rights attach to different categories of person. An employee generally has the fullest set of protections, a worker has a narrower set, and a genuine self-employed contractor sits largely outside employment law. Getting the category right at the start tends to prevent expensive arguments later on.

Key steps

Work out who you are actually hiring. Before drafting any paperwork, decide whether the person is an employee, a worker or a self-employed contractor. Look at how much control you have over their work, whether they can send a substitute, and how integrated they are into your business. Labels in the contract do not settle the question if the reality on the ground says something different.

Put the right written terms in place. Employees and workers are entitled to a written statement of particulars from day one, covering pay, hours, holiday, place of work, notice and more. The form of contract should match the role, whether that is a standard permanent contract, a fixed-term arrangement, a zero-hours agreement or a senior executive contract with its own restrictive covenants and notice terms.

Build a set of HR policies that reflect your business. At minimum you should have disciplinary, grievance and health and safety policies, along with equal opportunities, anti-harassment, data protection and family leave policies. Larger employers will usually add anti-bribery, whistleblowing, drug and alcohol, and modern slavery statements. Policies should be accessible to staff and reviewed periodically.

Keep on top of pay, hours and leave obligations. This covers national minimum and living wage rates, statutory holiday of at least 5.6 weeks per year for full-time staff, rest breaks, the 48-hour average working week unless opted out, statutory sick pay, and the various forms of family-related leave and pay. Rates change, so check gov.uk for current figures each tax year.

Follow a fair process when ending employment. Whether the reason is conduct, capability, redundancy or something else, the process matters as much as the reason. Investigate properly, hold a meeting where the employee can respond, allow them to be accompanied, and give the right to appeal. Serve the correct notice or pay in lieu, and keep written records of each stage.

If you’re dealing with this kind of situation, a call with an experienced legal adviser can help you work out the right next step — from £49.

Common questions

QWhat is the difference between an employee, a worker and a contractor?

An employee works under a contract of employment and has the full range of statutory rights, including protection from unfair dismissal after qualifying service and entitlement to redundancy pay. A worker has a narrower set of rights covering things like minimum wage, paid holiday and rest breaks. A genuine self-employed contractor runs their own business and has very limited employment protections. The real working arrangement matters more than the label used in the contract.

QDo I have to give new staff a written contract?

Employees and workers must be given a written statement of the main terms of employment on or before their first day of work. This is a legal requirement under the Employment Rights Act 1996. It should cover pay, hours, holiday, place of work, notice, benefits and other core details. A fuller written contract is not strictly mandatory in every case, but having one is strongly advisable to avoid disputes about what was agreed.

QWhen does an employee gain protection from unfair dismissal?

In most cases, an employee needs two years of continuous service to bring an ordinary unfair dismissal claim. There are important exceptions, including dismissals connected to pregnancy, whistleblowing, trade union membership, asserting a statutory right, or discrimination on a protected characteristic. These are often called automatically unfair reasons and they apply from day one. The government has signalled changes in this area, so it is worth checking the current position.

QWhat notice period must I give when dismissing someone?

Statutory minimum notice is one week after one month of service, rising by one week for each full year worked, up to twelve weeks after twelve years. The employment contract may provide for longer notice, and if so that contractual period applies. Notice can sometimes be given as payment in lieu where the contract allows. Gross misconduct may justify dismissal without notice, but the investigation and process still need to be fair.

QWhich HR policies should every employer have?

At a minimum, most employers should have disciplinary, grievance and health and safety policies in writing. Equal opportunities, anti-bullying and harassment, data protection and family leave policies are also widely expected. Depending on size and sector, you may also want anti-bribery, whistleblowing, social media, drug and alcohol, and modern slavery policies. Clear policies help set expectations for staff and give you a fair framework when problems arise.

QCan I use zero-hours contracts in my business?

Zero-hours contracts are lawful in the UK and can suit roles where demand is genuinely unpredictable. Exclusivity clauses that prevent the individual from working elsewhere are not enforceable. People on zero-hours arrangements are usually workers rather than employees, so they are entitled to minimum wage, paid holiday and rest breaks. Reform in this area has been under discussion, so check the latest position before relying heavily on this model.

QWhat happens if I get the worker status wrong?

Misclassifying someone as self-employed when they are actually a worker or employee can be costly. You may face claims for unpaid holiday, unpaid minimum wage, unlawful deductions and, for employees, unfair dismissal and redundancy pay. HMRC may also pursue unpaid tax and National Insurance. Tribunals look at the real substance of the relationship, so documenting the arrangement properly and reviewing it as roles evolve is time well spent.

Official Sources

LegislationEmployment Rights Act 1996Read on legislation.gov.uk →

LegislationEquality Act 2010Read on legislation.gov.uk →

Official SourceAcas Code of Practice on Disciplinary and Grievance ProceduresRead on acas.org.uk →

Guidance · UK GovEmploying staff (gov.uk)Read on gov.uk →

Guidance · UK GovDismissing staff (gov.uk)Read on gov.uk →

Brad Askew Legal Tech Founder

Brad has a background in civil and commercial law and founded LegalDocuments.co.uk to make clear, reliable legal information accessible to everyone. This site is not a law firm and does not provide regulated legal advice.

Legal disclaimer

This article is for general information only and does not constitute legal advice. We are not solicitors. For advice on your specific situation, please consult a qualified solicitor.

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