Do small businesses need HR earlier than they think?

Few business owners start out wanting to be a ‘Chief People Officer’. But as soon as you hire someone, you are managing people, culture and employment risk. Things can feel straightforward, until they don’t. A performance issue surfaces, someone asks to change their hours, or new legislation, such as the Employment Rights Act 2025, changes the rules. 

When the day‑to‑day pressures of running a business take hold, people matters can easily slip down the list.  

But these people factors shouldn’t be an afterthought. Getting the employment basics right – from pay and holiday to sickness and contracts – sends a powerful signal about how people are valued. That consistency underpins a healthy workplace culture, gives business owners a clear framework for decision‑making, and reduces time spent firefighting avoidable issues. 

Perhaps you feel your business isn’t big enough for an HR department yet, but an early HR ‘MOT’ can save time, reduce risk and stop issues escalating, ensuring that the basics are in place at the right time.  

So what does this mean in practice? 

HR fundamentals for small businesses —

All employers need a core set of provisions to meet basic compliance and give clarity on ‘how we do things here’. These fall into three areas: 

Hiring and pay 

• Carrying out right to work checks  
• Issuing statements of main terms and conditions of employment 
• Ensuring compliance with National Minimum Wage and National Living Wage rules 

Time off and absence 

• Complying with statutory working time rules and rest breaks 
• Providing statutory holiday and holiday pay, and keeping records  
• Managing statutory leave and pay, including sickness absence, time off for family emergencies, and parental leave 

Conduct and fairness 

• Establishing policies to prevent discrimination and harassment 
• Having disciplinary and grievance procedures that reflect the Acas Code 

Without a clear framework, businesses face inconsistency, avoidable tension and legal risk, alongside time lost dealing with issues reactively. 

The Employment Rights Act 2025: a moving baseline —

Alongside these long-standing essentials, the legal landscape is shifting. With significant changes under the ERA 2025 already underway, and more coming in over the next 18 months, getting the basics right early is more important than ever. Reviewing contracts and policies now is often easier than waiting until an issue forces your hand. 

The Act covers wide‑ranging reforms, including changes to unfair dismissal qualifying periods, parent-related leave and new proactive duties to prevent sexual harassment and harassment by third parties. With such a large volume of complex change arriving over a short period, small business leaders may need to consider where additional support would be helpful. 

One example that illustrates how the baseline has already shifted under the Act is statutory sick pay. From 6 April 2026, it became available from day one of employment and to a wider group of employees. While the change strengthens support for workers, employers have raised some concerns about its potential impact on employee attendance and productivity.  

Access to family-related leave has also widened, with paternity and unpaid parental leave now available from day one.  

These changes make it important for employers to review policies and practices to ensure they reflect the new rules. Professional HR support can help organisations to understand the regulations, implement updates effectively and reduce the risk of issues further down the line. 

Changes to the unfair dismissal qualifying period —

Slightly further away, but still a priority for 2026, the two-year unfair dismissal qualifying period will be replaced with much shorter six-month qualifying period on 1 January 2027. This means employees who have six months’ service or more will be able to bring an unfair dismissal claim after six months, rather than waiting two years as they do now. This will significantly change the risk profile for employers, making 2026 a key year to review how people are hired and managed. 

Recruitment and selection processes may need tightening, with greater emphasis on structured induction periods, clear objectives and more active management from day one. Employment contracts, probation clauses and employee handbooks should also be reviewed to ensure they reflect the new landscape and provide clarity for both sides. HR professionals are well placed to support leaders in finding the right way forward for their business. 

Performance management will take on renewed importance too. Where probation periods are shortened or operate differently, employers will need robust processes in place to support employees early, address issues promptly and make fair, evidenced decisions. This puts more responsibility on line managers, who will need the confidence and capability to recruit the right people in the first place and manage under‑performance consistently. HR can design targeted training to ensure managers understand the changes and apply them effectively. 

With more than 20 changes to workers’ rights coming in under the ERA 2025, it can be a lot to manage alongside running the business. Quality HR support can help lighten the load by understanding your business needs, objectives and aspirations, then provide documents and guidance that reflect your culture or the culture you want to build. Bringing HR support in early can help you set things up properly, avoid common pitfalls and create a people management approach that will scale as you grow. 

HR support to build your people culture —

Once the fundamentals are in place, you can look beyond compliance and use people practices to add value, for your team and for the business. Often the trigger is an increase in HR questions, repeated ‘small’ issues, or a sense that things aren’t running as smoothly as they should.  Setting a strong foundation early on helps create the conditions for long-term success, supporting better decision-making, more consistent management practices, and a more positive employee experience. 

So, does your business need HR earlier than you thought? Almost certainly yes. Understanding people risks, putting the fundamentals in place, and staying alert to changes in employment law all protect your time, your culture and your bottom line. The key is to prepare and act sooner rather than later, keeping compliance as the baseline and setting a clear direction for your people.

---