What HR does a small business need in the UK?

UK small businesses need employment contracts within 2 months of hiring, a basic employee handbook covering policies and procedures, compliance with minimum wage and holiday entitlements (5.6 weeks minimum), auto-enrolment pension setup for eligible employees, and right-to-work checks for all new hires.

Is an employment contract legally required in the UK?

Yes, UK employers must provide a written statement of employment particulars within 2 months of the start date. This must include job title, pay, hours, holiday entitlement, notice periods, and place of work. Not providing this can lead to employment tribunal claims.

What are the HR obligations of a small business employer in the UK?

Key obligations include paying at least minimum wage, providing 5.6 weeks paid holiday, setting up auto-enrolment pensions for eligible staff, conducting right-to-work checks, maintaining employee records for HMRC, ensuring workplace health and safety, having employers' liability insurance, and following fair dismissal procedures.

HR Software for Small UK Businesses: What to Look For

The right HR software can save hours each week and prevent costly compliance mistakes. But with prices ranging from free to £500+ per month, how do you know what you actually need? This guide cuts through the marketing to help you make the right choice for your business size and budget.

What HR Software Actually Does

HR software replaces spreadsheets, paper files, and manual processes with a centralised system. At its core, it should help you:

Store Employee Information

Contact details, contracts, emergency contacts, bank details, and documents in one secure place.

Track Time Off

Holiday requests, approvals, balances, and sickness records without spreadsheet chaos.

Manage Performance

Record one-to-ones, set objectives, track reviews, and document performance issues.

Automate Admin

Onboarding checklists, document generation, reminders for important dates and compliance deadlines.

Essential Features for Small Businesses

Must-Have Features

✓
Holiday tracking: Automatic calculation of entitlement, easy request/approval process
✓
Document storage: Secure, organised storage for contracts and policies
✓
Employee self-service: Let staff update details and request time off themselves
✓
UK compliance: Built for UK law (not US), handles bank holidays correctly
✓
Mobile access: Check and approve requests from anywhere

Often Unnecessary (Under 20 Staff)

×
Advanced analytics: Fancy dashboards look nice but you won't use them with 10 employees
×
Recruitment module: Expensive add-on when you hire 2-3 people per year
×
Learning management: Complex training systems for small teams are overkill
×
Shift scheduling: Unless you're retail/hospitality, basic calendars work fine
×
Expense management: Separate tools often work better and cost less

Pricing Reality Check

HR software pricing typically follows one of three models:

Per Employee Pricing (£2-8 per employee/month)

Scales with your team. Great value at 5 employees (£10-40/month), gets expensive at 50+ employees (£100-400/month).

Best for: Steady teams of 5-25 people

Flat Rate Pricing (£20-100/month)

One price regardless of team size (usually with an employee cap). Predictable costs, often better value for larger small businesses.

Best for: Growing businesses or those with 20+ employees

Freemium (Free for 3-5 employees)

Basic features free for tiny teams, then paid upgrades. Perfect for testing but check the paid tier pricing before committing.

Best for: Micro-businesses just starting out

Hidden costs to watch for: Setup fees (£200-500), training costs, data migration charges, premium support, and contract exit fees. Always ask for the total cost including all fees.

Making the Right Choice

1-5 Employees: Keep It Simple

You probably don't need HR software yet. A well-organised Google Drive or Dropbox folder with templates and spreadsheets will do the job. Focus on getting proper contracts and policies in place first.

If you do want software: Look for free tiers of established products like CharlieHR or Breathe HR.

6-20 Employees: Time to Systemise

This is the sweet spot for HR software. You have enough complexity to justify the cost but not so much that you need enterprise features. Focus on holiday tracking, document management, and basic reporting.

Recommended approach: Trial 2-3 options with your actual data. Most offer 14-30 day free trials. Test the features you'll actually use daily.

21-50 Employees: Consider Integration

At this size, integration with payroll and accounting software becomes valuable. Look for systems that connect with your existing tools. Performance management and reporting features start to justify their cost.

Key consideration: You might benefit from some HR expertise alongside the software. Consider fractional HR support to maximise your investment.

Implementation Tips

Set Yourself Up for Success

1
Start with clean data: Update your employee records before migrating. Fix inconsistencies now rather than importing messy data.
2
Phase the rollout: Start with holiday tracking, get everyone comfortable, then add features gradually.
3
Train properly: 30 minutes of training saves hours of confusion. Record a session for new starters.
4
Set clear policies: Document how and when employees should use the system. Make it part of onboarding.
5
Review after 3 months: Are you using what you're paying for? What's working? What's not? Adjust accordingly.

Ready to Modernise Your HR?

Small HR combines the simplicity you need with the features that matter. Built specifically for UK businesses with 1-50 employees.

Explore Small HR Software