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10 HR essentials for small businesses

Expanding your team is an exciting sign of small business success - but it comes with responsibilities. Here, we summarise HR essentials for small businesses.

7 min read

One of the most exciting aspects of growing your business is taking on new employees. It’s a major sign that your business is doing well, and it can be really exciting, not to mention useful, to have more staff on hand. 

At the same time, taking on more workers means taking on more responsibilities. One of the most important of these is setting up human resources (HR) policies to keep your employees safe, stay in line with regulations and ensure your business continues to grow. 

In this article, we’ll go through the 10 most important things to have in order. 

Do I need an HR manager?

While it’s not essential, you should consider hiring a full- or part-time HR manager to keep everything in line. For best results, you should also make sure you use HR software that’s compatible with QuickBooks to help you keep track of things like time sheets and pensions

10 small business HR essentials 

1) Employment contracts

Each new employee will need a contract. While it doesn’t need to be too long or complicated, you’ll need to include:

  • employee and employer names 

  • dates of first employment and, if different, start of continuous employment 

  • if not permanent, the period of employment 

  • the notice period to be given by either party 

  • terms and conditions relating to hours of work, holiday leave and pay, sick leave and pay and pension arrangements 

  • any relevant disciplinary rules and grievance procedures, or reference to where these rules and procedures can be found 

  • the person an employee should go to if they have a grievance 

  • any collective agreements that directly affect the employment 

If the employee is required to work outside the UK for a month or more, the contract should also include:

  • the period for which the employee will work abroad 

  • the currency they’ll be paid in 

  • any additional remuneration payable to the employee 

  • any terms and conditions relating to the employee’s return to the UK 

You may also want to include sections covering issues such as data protection and confidentiality. 

Crucially, you must issue the full contract for each employee within two months of the employment’s start date. 

2) Payroll and pensions 

You need a system in place for paying employees and making any necessary deductions for tax and National Insurance. 

While in theory you can handle this yourself, there are strict reporting requirements as well as regulations covering when employees must be paid. Larger businesses sometimes outsource these tasks to specialist payroll firms, and most small businesses leave it to their accountants. 

All businesses are required to put employees into a pension scheme and pay contributions on their behalf. This ‘automatic enrolment’ applies to all sectors and all businesses, regardless of size. 

Again, you can outsource this process to a specialist or save money and do it yourself. See the government’s page for more details. 

3) Employee handbook

Both employers and employees benefit when rules and expectations are clear. 

To that end, you should produce a small handbook outlining things like general behaviour and dress codes as well as policies on leave and disciplinary procedures.

Keep it concise and make it easy to reference. 

An employee handbook will not only help you in the event of a dispute, providing a clear set of rules to refer to, but will also help avoid disputes in the first place.

4) Recruitment essentials 

Even before you start taking on employees, you should consider how you’re going to find and hire the right people. Having a good process in place is crucial to growing your business in a sustainable way, with employees who stay on and benefit you in the long term. 

You’ll also need to comply with relevant checks, including:

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5) Health and safety

Health and safety regulations are serious business, and not complying with them can get you hit with a huge fine – or, worse, get your employees hurt. 

Luckily, low-risk small businesses don’t have to meet the same standards as larger enterprises. Those with fewer than five employees don’t even need to write down risk assessments or policies. 

Those with five employees or more do need written records of their health and safety policies, however. 

Even if you don’t need to report to the Health and Safety Executive, you should still conduct a risk assessment and outline policies to deal with risks. 

Potential hazards include:

  • trips and falls 

  • working at height 

  • electrical safety 

  • fire safety

As always, you need to communicate risks to your employees, along with any health and safety procedures they need to follow. 

6) Onboarding process 

Having the right person matters, of course, but even the perfect employee will struggle if you don’t take the time to bring them on board properly. 

This will also impact your bottom line, as new workers waste time figuring out administrative issues instead of doing their jobs. 

Once again, having a process is crucial here. 

You should devise an induction plan, covering things like:

  • introductions to other staff 

  • training 

  • a tour of the workspace, if relevant 

  • an opportunity to talk through the contract and employee handbook

You might also find it useful to pair each new employee up with a more experienced one, as this will encourage them to ask questions and learn more about how the business works as they go. 

7) Employee performance management and reviews 

The term ‘performance management’ can conjure up images of boring bureaucrats working through piles of paperwork, but it doesn’t need to be like this. 

Good onboarding can help employees know what’s expected of them, but they’ll need ongoing management if they’re going to improve. 

Put a clear system in place for measuring workers’ performance, be transparent about aims and use regular reviews to raise any issues early on – and to work with employees to develop better practices. 

8) Employee development, motivation and training

Similarly, training shouldn’t end once your new worker is settled in. The best businesses continue to train their employees over time. 

This is crucial if your business is changing something important or if regulations change, and can provide a helpful reminder of best practices. 

Be careful not to overdo it, though: too much training can frustrate employees and make them feel their time is being wasted. 

A better approach to development is to include it in performance management. If you tell your employees what’s expected and let them know when they’re slipping (or excelling!), they’re much more likely to improve – especially if you provide rewards to help motivate them. 

9) Employee perks and benefits

The best businesses provide more to their employees than just money. Be creative with what you offer your workers, and don’t be afraid to try new things. 

Examples of innovative perks and benefits include:

  • flexible working hours 

  • job sharing 

  • work-from-home arrangements 

It’s crucial that your workers actually appreciate their benefits, though. A group day out might seem like a great idea, but some teams just won’t enjoy that sort of forced fun. 

Take cues from your workers and try to learn what motivates them as individuals.

10) Management style 

All of the above can be summarised under the general heading of ‘management style’, from implementing processes to providing resources and giving employees the kind of benefits they value. 

Above all, communication is key. Avoid grey areas in company policies wherever possible, and make clear how employees should engage with you – whether you prefer to use formal channels or keep your office door open. 

We hope that this guide to HR essentials is helpful. For more useful tips on how to grow your business, complete this questionnaire and get a personalised to-do list sent straight to your inbox.