Hiring Your First Employees: Why Getting Your Employment Documents Right Early Matters

For many startups and growing businesses, hiring a first employee is an exciting milestone. It often marks the point where founders start building a team and scaling beyond doing everything themselves.

However, employers often underestimate how important it is to put the right employment contracts, workplace policies and employment law protections in place from the outset. As employment lawyers for startups and scaleups, we regularly see businesses run into avoidable issues because key documentation wasn't prioritised early enough.

This is becoming even more important as businesses prepare for the upcoming Employment Rights Act reforms due to come into force in January 2027. One major impact is that it will become much harder for employers to change employees’ key terms and conditions after employment has started without the individual's agreement and providing them something of value in return. At the same time, the Act will allow a much wider group of employees to bring uncapped claims after a significantly shorter period of service.

For founders and growing businesses, this means getting your employment documentation right from day one is no longer simply a compliance exercise. It is an important part of protecting the business as it grows.

Employers should therefore think carefully about getting employment terms right at the beginning, not only because certain documentation is legally required, but because changing terms later can be difficult, more expensive and more risky.

The Employment Law Essentials Before Hiring Your First Employee

Before employing staff, or as soon as the first employee is hired, businesses should ensure a number of practical steps are completed, including:

• registering as an employer with HMRC;
• setting up payroll and PAYE arrangements;
• putting in place a compliant workplace pension scheme;
• carrying out right to work checks before employment starts and retaining records appropriately;
• considering what employee benefits will be offered and how these will be documented; and
• obtaining employers’ liability insurance.

These are all important foundations for businesses hiring employees in the UK and help ensure your startup remains compliant as your team grows.

Why Employment Contracts Matter for Startups and Scaleups

Every employee must receive a written statement of employment particulars (an employment contract) before they start work. However, beyond legal compliance, well-drafted employment contracts for startups play a key commercial role in protecting the business as it scales.

From our experience providing employment law support for startups and growing businesses, issues often arise where:

• businesses use inconsistent contracts across different hires;
• key protections are missing or poorly drafted, particularly restrictive covenants;
• flexibility clauses are too limited;
• the nature of bonus or commission arrangements are unclear or inadvertently become contractual entitlements;
• hybrid working expectations evolve informally over time; or
• intellectual property and confidentiality provisions do not properly reflect the business model.

For most businesses, we recommend maintaining one core employment contract template that can be used across the majority of employees, with optional wording for certain roles or benefits where needed. This helps ensure consistency across the workforce and makes future updates easier to manage.

Having a robust employment contract from the outset can save significant time, cost and risk further down the line.

Different Roles May Need Different Documentation

Different arrangements may require different documentation.

For example, statutory directors should usually have a Directors’ Service Agreement rather than a standard employment contract, reflecting their dual role as both employee and office-holder.

The right approach will depend on the nature of the business, the seniority of the individual and the wider growth plans of the company.

Don't Forget Workplace Policies

Employers should also ensure that appropriate workplace policies are in place from an early stage.

There are a number of policies that employers are legally required to have in place from the start of employment, including disciplinary and grievance procedures, a privacy notice and, once a business reaches five employees, a health and safety policy.

There are also several policies which, while not strictly mandatory, can significantly reduce legal and regulatory risk if issues arise. These can include:

• whistleblowing policies;
• equal opportunities policies;
• sexual harassment policies;
• data protection policies; and
• other employee handbook provisions relevant to the business.

For startups and scaleups, these policies are often overlooked until a problem arises. Putting them in place early can help create consistency, reduce risk and provide clarity for employees as the team grows.

Building Strong Employment Foundations for Growth

The right employment documentation will depend heavily on the nature of the business, anticipated growth plans, seniority of hires and working arrangements.

Employers who rely on informal arrangements or generic online templates often discover issues only once disputes arise, investment is being raised or the business is preparing for acquisition.

With the January 2027 reforms approaching, now is a sensible time for startups, scaleups and growing businesses to review whether their employment contracts, workplace policies and wider employment documentation properly reflect how the business operates in practice.

Seeking employment law advice early can help ensure sufficient flexibility is built into arrangements from the outset, helping founders scale their teams confidently while avoiding unnecessary legal risk later on.

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