Employee handbook: the policies a small employer needs

What a handbook is for

An employee handbook collects the policies and procedures that apply to everyone: how to report sickness, how to raise a grievance, what happens in a disciplinary case, what the business expects on equality, data, IT and social media. It sits alongside the contract of employment, which sets out the individual terms, such as pay, hours, holiday and notice.

It does three jobs. It tells managers what to do, so that two managers faced with the same problem handle it the same way. It tells employees what to expect, which reduces grievances about inconsistency. And it is evidence: when a tribunal asks whether the employer had a policy, had communicated it and had followed it, the handbook and the acknowledgement of receipt are the answer.

A business with one employee needs the core policies as much as one with fifty. What changes with size is the number of policies, the length of each, and the amount of time somebody has to spend keeping them current.

Contractual and non-contractual policies

The single most important drafting decision is whether the handbook, or any policy in it, forms part of the contract of employment.

A contractual policy is a term of the contract. It can only be changed with the employee's agreement, and changing it unilaterally is a breach that can support a claim for constructive dismissal. A non-contractual policy is a statement of how the employer currently does things, and the employer can update it by issuing a new version.

For almost everything in a handbook, non-contractual is right. Sickness reporting procedures, IT rules, the equality policy and the disciplinary procedure all need updating as the law changes and as the business grows, and an employer who has to negotiate every change with every employee will stop updating them. The handbook should say, in its first pages, that its contents do not form part of the contract of employment unless a particular policy states otherwise, and each contract should say the same.

Where a term has to bind, it belongs in the contract and not in the handbook. Confidentiality, restrictive covenants, intellectual property, deductions from pay, garden leave and pay in lieu of notice are all terms. Enhanced entitlements the employer intends to honour, such as enhanced sick pay or maternity pay, can go either way: put them in the handbook as non-contractual and they can be withdrawn, put them in the contract and they cannot. The choice should be made knowingly.

The trap is the handbook that says it is non-contractual and then uses the language of obligation throughout, or the contract that incorporates the handbook wholesale. Tribunals look at substance, and a policy written as a promise can be found to be one.

What goes in the written statement instead

Section 1 of the Employment Rights Act 1996 requires an employer to give every employee and worker a written statement of particulars, and most of it is due on or before the first day of work. The day-one particulars include the names of the parties, the start date, pay and how it is calculated, hours and days of work and whether they vary, holiday entitlement, sick pay and procedures, other paid leave, benefits, notice periods, job title, the expected duration if it is not permanent, any probationary period and its conditions, the place of work, and any training the employer requires.

A few items can follow within two months: pensions, collective agreements, non-compulsory training the employer provides, and the disciplinary and grievance procedures. Some of the particulars, including sick pay and the disciplinary and grievance procedures, can be given by reference to another document that the employee has a reasonable opportunity to read, which is where the handbook comes in.

The division follows from that. The statement, usually the contract itself, holds the terms the statute requires. The handbook holds the procedures the statement points to. A contract that says "the disciplinary procedure is set out in the handbook, which does not form part of your contract" satisfies section 1 and keeps the procedure non-contractual. Our guide to hiring your first employee covers the statement in more detail.

Disciplinary and grievance

These two procedures are the ones a tribunal will read first, and they should follow the Acas Code of Practice on disciplinary and grievance procedures. The Code sets out the minimum: investigate, put the case to the employee in writing, hold a meeting at which they can be accompanied by a colleague or trade union representative, decide, give the decision in writing, and offer an appeal to somebody not previously involved. Where an employer unreasonably fails to follow the Code, section 207A of the Trade Union and Labour Relations (Consolidation) Act 1992 allows a tribunal to increase any award by up to 25%.

The disciplinary policy should say what counts as misconduct and what counts as gross misconduct, with examples, and should set out the stages of warning. It should preserve the employer's discretion to start at any stage and to suspend on full pay while investigating. It should say who hears each stage, which in a small business needs thought, because the owner cannot be the investigator, the decision-maker and the appeal.

The grievance policy should say how to raise a concern informally and formally, who hears it, the timescale, the right to be accompanied and the appeal. Its purpose is to make sure a complaint is answered, because an unanswered grievance is the most common single cause of a constructive dismissal claim. Our guide to dismissing an employee fairly sets out how the disciplinary procedure is used in practice.

Equality and harassment

An equality policy sets out that the employer does not tolerate discrimination, harassment or victimisation on the grounds of any protected characteristic, explains what those terms mean, and says how to complain. Its legal value is the statutory defence: an employer is liable for discrimination by its employees unless it took all reasonable steps to prevent it, and a policy that has been issued, explained and enforced is the first of those steps.

Sexual harassment now carries a separate duty. The Worker Protection (Amendment of Equality Act 2010) Act 2023 inserted section 40A into the Equality Act 2010, in force from 26 October 2024, requiring an employer to take reasonable steps to prevent sexual harassment of its employees in the course of their employment. Where a tribunal upholds a harassment claim and finds the duty was breached, it can increase compensation by up to 25%, and the Equality and Human Rights Commission can enforce the duty on its own account.

The Employment Rights Act 2025 raises the bar. Section 20 changes the duty to one to take all reasonable steps, and the government's timeline gives 30 October 2026 for that change and for a new liability where an employer fails to prevent harassment of its employees by third parties such as customers and clients. Section 20 was not in force when this guide was written, so check the position before relying on the date, and see our guide to the Employment Rights Act 2025 for the wider timetable.

What the policy needs, in either version, is a risk assessment behind it, a reporting route that works, training for managers, and a record of all of it. A policy that exists only in the handbook is a reasonable step; on its own it is not all of them.

Sickness, flexible working and family leave

Sickness absence. The policy should say how and when to report sickness, what evidence is needed and from when, how return-to-work conversations are held, and when long-term or repeated absence moves into a formal capability process. Since 6 April 2026 statutory sick pay has been payable from the first day of sickness with no lower earnings limit, at £123.25 a week or 80% of average weekly earnings, whichever is lower, so any policy that still refers to waiting days or an earnings threshold is out of date.

Flexible working. Under the Employment Relations (Flexible Working) Act 2023, in force since 6 April 2024, every employee can make a statutory request from the first day of employment, can make two requests in any twelve months, and must receive a decision within two months unless a longer period is agreed. The employer must consult the employee before refusing, and can refuse only for one of the eight business reasons in the legislation. The policy should set out the procedure and the reasons, and should be revisited when the 2025 Act's further changes to flexible working, listed for 2027, are brought in.

Family leave. Maternity, paternity, adoption, shared parental and parental leave each have statutory rules. A handbook should summarise them accurately and point to the statutory guidance for the full detail. Since 6 April 2026 paternity leave and unpaid parental leave have been day-one rights, and the 2025 Act adds a right to bereavement leave, listed for 2027. Where the employer enhances any of these above the statutory minimum, decide whether the enhancement is contractual before writing it down.

Data protection, IT and social media

An employer holds personal data about every member of staff and is a controller of it. The handbook should carry, or point to, a privacy notice for workers explaining what is held, why, for how long and who it is shared with, and a short data protection policy explaining what staff must do with the personal data they handle in their work. The Information Commissioner's Office publishes guidance for employers on worker records, health information and monitoring, and a small employer's policy can follow it closely.

An IT and communications policy sets out acceptable use of the employer's systems, what is monitored and why, and the rules on passwords, devices and security. Where the employer monitors email, internet use or vehicles, the ICO expects the monitoring to be proportionate and the staff to be told, and the policy is where they are told.

A social media policy covers use of the employer's own accounts and what staff may say about the business, its clients and colleagues on their own. It should be specific enough that a disciplinary case can point to the rule that was broken, and it should sit within the disciplinary policy's definition of misconduct.

Whistleblowing

A worker who makes a protected disclosure about wrongdoing, in the categories the law sets out, is protected from dismissal and from detriment. The categories include criminal offences, a failure to comply with a legal obligation, danger to health and safety, damage to the environment, a miscarriage of justice, a cover-up of any of those, and since April 2026 sexual harassment. The disclosure must be in the public interest, which excludes a purely personal grievance.

A whistleblowing policy tells staff how to raise a concern of that kind, to whom, and what will happen. It gives the employer the chance to hear about a problem internally before it goes to a regulator or the press, and it demonstrates, if a claim is later brought, that the employer took such concerns seriously. No policy and no settlement agreement can stop a worker making a protected disclosure, and the policy should not try.

Introducing and updating it

Issuing a non-contractual handbook does not need agreement, but it does need communication. Send it to everyone, explain what has changed if it replaces an earlier version, and collect an acknowledgement, whether a signed slip or an email reply. Keep the acknowledgements with the personnel files, because the point of them is to be produced later.

Where any policy is contractual, or where a change removes something staff currently enjoy, the change needs consultation and agreement, and the contract should be varied in writing. Presenting a contractual change as a handbook update is one of the ways a business talks itself into a constructive dismissal claim.

Put a version number and date on the front, and keep the superseded versions, because a disciplinary case in 2027 may turn on what the policy said in 2025. Review the whole document at least once a year and whenever the law moves. Between now and the end of 2027 that means the sexual harassment duty, the unfair dismissal qualifying period falling to six months on 1 January 2027, the changes to flexible working, guaranteed hours for zero-hours staff, and bereavement leave.

These rules apply across Great Britain; Northern Ireland has separate employment legislation, and its written statement and family leave rules differ in detail.

Frequently asked questions

Is an employee handbook a legal requirement?

No single law requires a handbook, but several require what usually goes in one. Section 1 of the Employment Rights Act 1996 requires the disciplinary and grievance procedures to be given in writing or by reference to an accessible document. Data protection law requires a privacy notice for workers. The duty to prevent sexual harassment is hard to meet without a written policy. A handbook is the practical way to satisfy those obligations in one place.

Should the handbook be part of the contract of employment?

For almost all of it, no. A contractual policy can only be changed with each employee's agreement, and changing it without agreement is a breach that can found a constructive dismissal claim. State on the first page that the handbook does not form part of the contract unless a policy says otherwise, and say the same in each contract. Terms that must bind, such as confidentiality, restrictive covenants and deductions from pay, belong in the contract itself.

Which policies does a small employer need?

Disciplinary and grievance procedures following the Acas Code, an equality and anti-harassment policy that addresses the duty to prevent sexual harassment, a sickness absence policy, a flexible working procedure, a summary of family leave rights, a data protection policy and worker privacy notice, an IT and monitoring policy, a social media policy and a whistleblowing policy. Beyond those, add what the business needs: expenses, vehicles, health and safety, homeworking.

What has to be given to a new employee on day one?

Section 1 of the Employment Rights Act 1996 requires the principal particulars on or before the first day: the parties, start date, pay, hours and days, holiday, sick pay and procedures, other paid leave, benefits, notice, job title, expected duration, probation, place of work and required training. Pensions, collective agreements, non-compulsory training and the disciplinary and grievance procedures can follow within two months, and some items can be given by reference to the handbook.

What does the duty to prevent sexual harassment require?

Since 26 October 2024, section 40A of the Equality Act 2010 has required employers to take reasonable steps to prevent sexual harassment of their employees in the course of employment. That means a risk assessment, a policy, a reporting route, training and records. A tribunal can increase compensation by up to 25% where the duty is breached. The government's timeline changes the duty to all reasonable steps from 30 October 2026, with new liability for harassment by third parties.

Do I have to allow flexible working?

You have to consider a request properly. Since 6 April 2024 every employee can make a statutory request from day one, up to twice in twelve months, and you must consult them and decide within two months. You can refuse only for one of the eight business reasons set out in the legislation, such as the burden of additional costs or an inability to reorganise work among existing staff, and you must give the reason in writing.

How do I change the handbook once it is issued?

For non-contractual policies, issue the new version, explain what has changed and collect a fresh acknowledgement. For any policy that is contractual, or any change that removes an entitlement staff currently have, consult, obtain agreement and record the variation in writing. Keep every superseded version with its date, because a later dispute may turn on what the policy said at the time.

Sources & further reading

• Employment Rights Act 1996, section 1
• GOV.UK: written statement of employment particulars
• Equality Act 2010, section 40A
• Worker Protection (Amendment of Equality Act 2010) Act 2023
• Employment Relations (Flexible Working) Act 2023
• GOV.UK: flexible working, after the application
• Acas: Code of Practice on disciplinary and grievance procedures
• ICO: employment guidance for organisations

This article is general information, not legal advice. The law changes and depends on your circumstances — always take advice on your specific situation before acting. Last reviewed 22 September 2026. AD Solicitors Limited is a recognised body regulated by the SRA (no. 8011228).