Essential Employment Policies

What are the essential employment policies for a new business?

Essential Employment Policies. Many of the businesses that join my HR Services have no employment policies in place and whilst some have a list of what employment policies, they would like to introduce others are fearful of the bureaucracy that written employment policies would introduce to their business.

To work out what the essential employment policies are for your business we need to look at the clauses within your contract of employment!

Contracts of Employment

A contract of employment is a written agreement between an employer and an employee that outlines the role they will perform and what’s expected of them during the employment relationship. There is a legal requirement in the UK to provide certain information in one document on or before the first day of employment, this is known as the Section 1 Statement.

An employment contract is formed when an employer makes a clear offer of work to an applicant and they accept the offer in return for pay. Both the offer and the acceptance may be made orally or in writing. The importance of documenting the offer is that, should a dispute arise, the terms of the offer are easier to prove before a tribunal or court.

The Section 1 Statement is a summary of the employee’s Main Particulars of Employment. It will not necessarily cover every aspect of the contract of employment but it does provide evidence of the main terms and conditions and therefore that a contract exists.

Employers who fail to provide, or have an incomplete or inaccurate Section 1 Statements for an employee will have to pay an increased level of compensation in the event of a successful tribunal claim. (2-4 weeks pay).

Essential Contractual Policies

The essential policies that should be referred to in the Written Statement of Main Terms and Conditions are:

  1. Pay
    Pay is one of the most important parts of any employment relationship. You must pay your workers in accordance with the law and with their contracts of employment. Employees are entitled to be paid at least the National Minimum Wage (NMW). The required rate of pay per hour depends on age and whether they are an apprentice. The rate is set by the Government and it usually changes each October. There are no exemptions for small businesses.

    Be careful to monitor birthdays that could push an employee into a higher NMW pay band during the year.

    Equal Pay
    Men and women must be treated equally and paid the same rate for doing ‘like work’, ‘work rated as equivalent’ or ‘work of equal value’. Equal pay includes most terms in an employment contract:

    • basic pay
    • overtime rates
    • performance-related benefits
    • hours of work
    • access to pension schemes
    • non-monetary terms – for example, free gym membership
    • annual leave entitlements
  2. Benefits
    All benefits such as pension scheme, childcare vouchers, death in service benefits, staff discount schemes, lunch vouchers etc, should be documented whether they are contractual or non-contractual. To avoid making a non-contractual benefit contractual you can add the details of the benefit(s) as an appendix to the Section 1 Statement.
  3. Holiday Entitlement and Pay
    The holiday provisions contained in the Working Time Regulations apply to all “workers”. Over and above the organisation’s direct employees, the term “worker” includes contract staff, casual workers, homeworkers, agency temps and some freelance workers. Workers aged 16 and 17 are also entitled to paid annual holiday.Since April 2009, all employees must be granted no less than 5.6 weeks’ paid annual leave. This equates to 28 days for someone working five days a week. The number of days is capped at 28, so an employee working six days a week would be entitled to only 28 days’ leave. Public or bank holidays may be included within the 5.6 weeks, provided that paid time off is granted on those days.

    Employees qualify for paid annual leave from the first day of employment. There are special rules in place for how entitlement can be used during the first year of employment.

    Your policy should outline:

    • How pay is calculated, including the value of accrued holiday pay on termination
    • Bank and Public Holidays: are these normal working days or does the business close?
    • How annual entitlement is calculated with specific examples for new starters, leavers and part timers
    • How entitlement will be affected by a period of sickness
    • How requests for holidays will be handled, for instance when a number of colleagues request the same
    If your business closes for a period of time between Christmas and the New Year or for a period at another time of the year, maybe in the summer, you will need to include a clause to confirm how the holidays work for that period(s).
  4. Sickness and Absence Reporting Procedures
    The rules relating to reporting absence and rates of pay for periods of sickness must be provided to a new employee on or before day one of employment. The details can be contained within the Section 1 Statement or the statement can refer out to another document such as an Employee Handbook that is also provided on or before day one of employment.

    The sickness and absence procedure should be designed to take into account all employee absence other than approved holiday and periods of parental leave. It is important to make it clear to employees that the monitoring of absences does not imply that they are doing, or have done, anything wrong. The procedure should be clearly described as a means of managing attendance, and should not be confused with the employer’s disciplinary procedure. The absence policy should lay down rules regarding:-

    • Pay: entitlement to statutory sick pay and contractual sick pay and establishing who has the authority to approve payment over and above Statutory Sick Pay
    • Notification: covering who should be notified and in what form, e.g. in writing or on a standard form
    • Timescale for notification: for example, telephone by 10.00 am on the first day off sick
    • Certification: self-certification and medical certificates and ‘May be Fit for Work’ certificates
    • Maintaining contact during the period of absence
    • Returning to work: who to notify, return to work meetings
    • Frequent absence: trigger points, formal meetings, and level of warnings up to and including termination
    • Long term absence: review meetings, phased returns, alternative employment and termination of employment
    • Fit for Work Scheme: referral, assessment, return to work plan and discharge from the scheme

    Although all employees should be treated equally, a degree of discretion may be needed. It may help to have a rule that if line managers wish to extend an entitlement, they must seek the approval of a more senior manager who will be able to monitor fair treatment across the business.

  5. Parental Rights
    Statutory leave for family reasons is a complicated area where the law has changed frequently in recent years and, as an employer, it is important that your policies and procedures are kept up-to-date. The rules relating to maternity, paternity, adoption leave and pay and shared parental leave and pay must be provided to a new employee on or before day one of employment. The details can be contained within the Section 1 Statement or the statement can refer out to another document such as an Employee Handbook that is also provided on or before day one of employment.

    You will need individual policies to cover the following types of absence and pay:

    Maternity Leave and Pay
    All of your female employees have the right to maternity leave in the UK. They have 52 weeks available, it’s up to them how much of that they take. When they return, they have the right to return to their full-time role once it ends. Staff also have entitlements to their full contractual terms and conditions during their maternity leave. That’s apart from their standard pay.

    Paternity Leave and Pay
    An employee who has been matched with a child for the purpose of adoption has the right to adoption leave in the UK. They have 52 weeks available, it’s up to them how much of that they take. When they return, they have the right to return to their full-time role once it ends. Staff also have entitlements to their full contractual terms and conditions during their adoption leave. That’s apart from their standard pay. Where couples are adopting, adoption leave can be taken by either partner and the remaining partner is entitled to take paternity leave.

    Adoption Leave and Pay
    All expectant fathers, who satisfy the qualifying conditions, are entitled to take up to two weeks’ paternity leave to either support the mother, or adopter, following the birth, or adoption, or care for the baby, or adopted child. This is called Statutory Paternity Leave. Although it is usually the father who takes Paternity leave, woman can also take leave in certain circumstances, for instance if they are the partner of the birth mother, or where a couple adopts a child and the father, or mother in same sex relationships, take the entitlement to Statutory Adoption Leave.

    The law in relation to adoption leave and pay was updated in April 2015 to include some intended parents of surrogate children.

    Shared Parental Leave and Pay
    Under shared parental leave mothers and adopters are able to return to work early or give advance notice of their intention to curtail their statutory maternity or adoption leave and share untaken leave with their partner.

    Parental Leave (unpaid)
    All staff who have, or expect to have parental responsibility for a child under the age of 18 and who have accrued 12 months continuous service at the date the leave starts are entitled to take up to 18 weeks unpaid leave per qualifying child.

    The provisions limit the entitlement to four weeks in each calendar year, but employers can choose to allow an employee to take more. Such as:-

    • One block of 18 weeks per child
    • A number of blocks of at least one week and not exceeding 18 weeks per child

    Parental Leave can also be taken at the end of the maternity, paternity or adoption leave period in any of the above ways.

  6. Parental Bereavement Leave and Pay
    Parental Bereavement Leave is a new statutory entitlement for bereaved parents and primary carers who are employees to take up to two weeks leave from work in the 56 weeks following the death of a child.

    The new right to leave will mean that an employee who loses a child under the age of 18 or suffers a stillbirth after 24 weeks of pregnancy, will be entitled to 2 weeks’ statutory leave to be taken in one block or as two separate blocks of a week.

    The leave will be paid for employees who have at least 26 weeks’ service and who meet the minimum earnings criteria.

    Statutory parental bereavement pay will be paid at the same rate as statutory paternity pay i.e. £155.66 per week (from April 2022) or 90% of weekly earnings if lower.

  7. Discipline and Grievance
    The Statement of the Main Terms and Conditions of Employment must specify the person to whom the employee should apply if they are dissatisfied with any disciplinary action or grievance. Beyond that the employee may be referred elsewhere for the actual policy document. When preparing your Discipline and Grievance Policies you must take account of the ACAS Statutory Code of Practice on Discipline, Dismissal and Grievance. The Code sets out principles for handling disciplinary and grievance situations in the workplace and was introduced in April 2009.

    The Statutory Two and Three Step Procedures for dealing with disciplinary matters and grievances became obsolete when the ACAS Code was introduced in April 2009. If your Disciplinary and/or Grievance Policies still refer to these obsolete procedures you should update them to take account of the ACAS Code now.

    Whilst a failure to follow the Code would not, in itself, make you liable to proceedings, employment tribunals will take the Code into account when considering relevant cases. Tribunals will be able to increase awards by up to 25% for unreasonable failure to comply with any provision of the Code. They can also decrease awards by a similar percentage if the employee does not comply with the procedure.

  8. Notice Periods

    Whichever party serves notice, either employee or employer, and for whatever reason a notice period must be given. The notice period will be determined either by law or by the terms of the contract, either way it can be varied in some circumstances.

    The minimum legal notice period to be given by an employer is:

    • One week’s notice if the employee has been employed by the employer continuously for one month or more but for less than two years.
    • Two weeks’ notice if the employee has been employed by the employer continuously for two years and one additional week’s notice for each further complete year of continuous employment, up to a maximum of 12 weeks.

    You may if you wish include longer notice periods in your employment contract. For example, the employee might have worked with you for six months. According to statutory notice, they can give one week’s notice, however you may have set out in their contract that they must give one month’s notice.

    The minimum statutory notice period which must be given by an employee is:

    • At least one week’s notice if employed continuously for one month or more by that employer.
    • The minimum notice period does not increase with longer service.

    Unless a contract states otherwise, notice can be given on any day of the week. The notice period runs from the start of the day after the day on which notice was served. So, if a week’s notice is given on a Monday, the period of notice will begin on Tuesday and expire at the end of the following Monday.

    You may include special terms about notice in your contract, for example where an employee has access to information that you wish to protect from a competitor.

    Fixed term contracts don’t require notice because a date has been specified for when the contract/employment will end. However, if the employee wishes to leave before the end of the fixed term, statutory notice will need to be allowed.

Other Essential Employment Policies

Beyond the requirements of the Section 1 Statement there are some essential policies that are required by employment legislation and it’s much easier to create and introduce policies which meet these requirements now rather than waiting till you need them and then having to deal with a situation in an uncoordinated and ad-hoc manner. The pieces of legislation you need to consider are:

  1. Equality
    The Equality and Human Rights Commission have stated that every organisation should have an equality policy to ensure equal opportunities, and share it with staff. This should also involve arrangements for how you will deal with harassment issues.

    An Equality policy ensures everyone is on the same page with what is and what is not acceptable behaviour. Often, people make jokes, send inappropriate emails or behave in ways they don’t realise constitute discrimination or harassment under the Equality Act. A solid and clear policy ensures there are no misunderstandings.

    A written Equality policy also helps protect you in the event you are accused of workplace discrimination or harassment. If no policy is in place and a complaint is made, your company will have a tough time defending itself.

    Discrimination and harassment are often subtle or even unintentional. Good company policies are designed to simultaneously educate everyone and also prevent unconscious bias during recruitment, promotion or other employee-related activities.

  2. Redundancy Procedures
    These procedures need to be within the legal arrangements for making individuals or groups redundant including selection for redundancy and consultation requirements. Redundancy is a fair reason for dismissing an employee but only if a full and fair consultation process is carried out and the reason for the redundancy dismissal is the closure of a business or workplace or a reduced need for employees to carry out work of a particular type.

    Adequate time must be allowed for consultation on the redundancy plans and this will be at least:

    • 30 days before the first redundancy where there are 20 to 99 proposed redundancies; and
    • 45 days (reduced from 90 days as of 6 April 2013) before the first redundancy where there are 100 or more proposed redundancies.

    Where there are fewer than 20 proposed redundancies, the consultation period is not specified but employers should allow at least two weeks.

    Consultations should be with a view to avoiding redundancies or minimizing their impact.

    In any redundancy situation, employers must consult with individual employees. In addition, employers must consult with trade union or elected employee representatives if more than 20 employees are affected within a 90-day period. This is known as collective consultation.

    Lay-offs and short-time working can be considered as a temporary alternative to redundancy.

  3. Whistle Blowing
    Individuals have protected rights when making a qualifying disclosure.

So, there you have your essential HR policies. Once you’ve got all these in place the easiest way to ensure that every employee receives the same information is to set them out in an Employee Handbook.

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Essential Employment Policies


Kathryn is a highly experienced HR Manager with a wealth of skills and knowledge acquired across a variety of industries including manufacturing, health and social care and financial services. She has worked in small localised business and larger multi sited organisations and is comfortable liaising with senior managers and union officials as well as answering queries from team members. Connect with Kathryn on:

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