An employee handbook is a reference document that sets out the policies, procedures, and expectations that shape how a small business operates day-to-day. Whether you’re employing your first staff member or formalising procedures in an established business, a well-structured handbook protects both the employer and employees by making expectations clear from the start. This guide covers what must be included, what should be included, and how to keep the handbook up to date.
The difference between contractual and non-contractual policies
Not everything in a handbook has the same legal force. Some policies form part of the employment contract itself; others are guidance that the employer can change with appropriate notice.
Contractual policies are terms that form part of the employment contract. If a policy is described in the contract or is referred to in the written statement, employees have a contractual right to it. Changes to contractual terms require the employee’s agreement. Examples include notice periods, salary, hours of work, and job title. If an employee is dismissed for breaching a contractual term (for example, refusing to comply with a notice period they agreed to), that can be fair grounds for dismissal.
Non-contractual policies are guidelines that form part of the handbook but are not part of the contract. The employer can change these with reasonable notice—typically given in the handbook itself or communicated to staff. Examples include guidance on how to apply for leave, guidance on dress code, or suggestions for working from home. Breaking a non-contractual policy alone is not usually grounds for dismissal.
In the handbook, make it clear which policies are contractual. A simple statement such as “The following sections form part of your contract of employment” signals this. For non-contractual items, you might write “The following policies guide how we operate but are not contractual terms.”
The written statement: a legal requirement on day one
Employers must give employees a written statement of employment particulars. This is not an optional document—it is a legal requirement. It must be provided in two stages.
On the first day of employment, the principal statement must include:
- the employer’s name
- the employee’s name, job title, and start date
- pay rate and frequency
- hours and days of work, and whether these vary
- holiday entitlement (including whether this includes public holidays)
- the place of work and whether the employee may have to relocate
- how long the job is expected to last (and the end date if it is fixed-term)
- probation period (if any) and its conditions
- any other benefits (for example, childcare vouchers or lunch allowance)
- any obligatory training and whether it is paid for
- the date any previous employment started (if it counts towards continuous service)
On the first day, the employer must also provide information about sick pay and procedures, other paid leave (maternity, paternity, adoption), and notice periods. This can be part of the principal statement or in a separate document the employee has reasonable access to (such as the employee handbook).
Within 2 months of the start date, the employer must give the wider written statement, which includes:
- details of pensions and pension schemes
- information about collective agreements
- information about non-compulsory training provided by the employer
- disciplinary and grievance procedures
Many small businesses fold all of this into the handbook and reference it in the employment contract. This is an efficient approach, but the employer must be able to prove each piece of information was given in time.
Essential policies to include
Beyond the written statement, certain areas of law require the handbook to address specific topics so that employees understand what applies to them.
Discipline and grievance procedures. Employers should follow the Acas Code of Practice on disciplinary and grievance procedures. The handbook should set out the steps: investigation, a letter inviting the employee to a hearing, the hearing itself, the right to be accompanied, possible outcomes (warnings or dismissal), and the right to appeal. The handbook should also explain what counts as misconduct and make clear the difference between informal and formal processes.
Equality and discrimination. Under the Equality Act 2010, employers must not discriminate on the grounds of age, disability, gender reassignment, marriage or civil partnership, pregnancy or maternity, race, religion or belief, sex, or sexual orientation. The handbook should describe what this means in practice: for example, recruitment decisions will be based on merit, pay will be equal for equal work, and the employer has a zero-tolerance approach to harassment. Make clear how employees can report concerns and who they should approach.
Data protection. Employers are required to follow data protection law (UK General Data Protection Regulation and Data Protection Act 2018). The handbook should explain in simple terms what personal data the employer holds, why, and how long it is kept. For example, staff records are kept for the duration of employment and a retention period afterwards for legal reasons. Employees should know they have rights: they can request to see what data is held about them (subject access), and they have rights around how that data is used.
Health and safety. The Health and Safety at Work etc Act 1974 requires employers to ensure the health, safety, and welfare of employees. The handbook should set out basic commitments: the business will carry out risk assessments, provide a safe working environment, and investigate accidents and incidents. Include where the first aid kit is, the procedure for reporting an accident, and the name of the health and safety representative (if one exists).
Absence and sickness. Set out the rules for reporting absence, the expected notice period, and what paperwork (such as a medical certificate) is required. Explain whether absences are paid or unpaid. Make clear what happens if an employee is absent repeatedly: it may trigger a disciplinary process under the disciplinary procedure. State the sick leave entitlement and make clear that annual leave accrues even when the employee is off sick and can be carried over if they cannot take it because of sickness.
Flexible working. All employees have the legal right to request flexible working from their first day. The handbook should set out how to make a request, that it will be considered in a reasonable manner, and the timescales involved (there is no fixed law on this, so the employer can set them). Explain that the employer can refuse if there is a good business reason.
Review and update
Policies should be reviewed periodically (for example, annually) and whenever relevant law changes. If a policy changes, notify employees of the change and the new effective date. Communicating a change does not require agreement if the policy is non-contractual, but the employer should give reasonable notice and explain why the change is being made.
Handbooks should be kept current. If a policy is no longer relevant, remove it. If practice has changed (for example, where most staff now work from home), update the handbook to reflect reality. Keeping the handbook aligned with actual practice reduces confusion and protects the business if a dispute arises.
Key points
- The written statement of employment particulars is a legal requirement: the principal statement on day one, the wider statement within 2 months.
- Make clear which policies are contractual (requiring agreement to change) and which are non-contractual (the employer can change with notice).
- Include the topics required by law: discipline, grievance, equality, data protection, health and safety, absence, and flexible working.
- Use plain language and structure the handbook so employees can find what they need.
- Review and update the handbook regularly to keep pace with changes in law and practice.
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