Do you need HR support with five employees?
Quick answer: At five employees you do not need an HR department, and you almost certainly should not hire one. You do need three things: a compliant written contract for every person, a basic set of policies including disciplinary and grievance, and someone you can ring before you act rather than after. Employment law does not have a small-business exemption. The obligations that apply to a business with 500 staff apply to you from the day you employ your first person. Most five-person businesses handle this with a low-cost retainer rather than an employee.
The rules do not scale with your headcount
This is the part that catches people out. There is no threshold at ten staff, or twenty, or fifty, below which employment law goes easy on you. A tribunal does not apply a discount because you are small and busy.
From the day you employ one person you are required to give a written statement of employment particulars, on or before their first day. Discrimination law applies from the moment you advertise the role, before anyone is even employed. If you have at least one member of staff who qualifies, you have to enrol them in a pension. You need employers’ liability insurance. And when something goes wrong, the ACAS Code of Practice on disciplinary and grievance procedures applies to you the same way it applies to everyone else.
What does change with size is your exposure. With five staff, one dispute is twenty per cent of your workforce. There is no HR manager to absorb it, no second manager to hear the appeal, and no slack in the rota while it plays out. Small businesses are not less likely to face a claim. They are less able to carry one.
What is actually required at five employees
| You must have | Why |
|---|---|
| A written statement of terms for every employee, given on or before day one | Legal requirement from the first day of employment. The commonest single failure we find in audits. |
| A disciplinary and grievance procedure | The ACAS Code applies whatever your size. Not following it can increase a tribunal award by up to 25%. |
| Right to work checks on file for everyone | Civil penalties for getting this wrong are substantial and rising. |
| Pension auto-enrolment in place | Applies from the moment you have one eligible member of staff. |
| Employers’ liability insurance | Legal requirement, with fines for each day you are uninsured. |
| Records of holiday, sickness and working time | You have to be able to evidence what was taken and paid. |
What you do not need
You do not need an HR manager. A full-time HR hire is rarely justified below about twenty-five to thirty staff, and at five people you would be paying a salary for a job that is a few hours a month.
You do not need a hundred-page handbook. A handbook that nobody reads and nobody follows is worse than a short one that people actually use, because at a tribunal you get judged against your own written procedure.
You do not need a national provider on a five-year contract. Whatever they quote you monthly, multiply it by the term before you sign.
The three situations that catch small employers out
The person who is not working out
This is the big one. Somebody was a mistake, everybody knows it, and the temptation is to have a quiet word and let them go on Friday. The rules on how and when you can do that are changing under the Employment Rights Act 2025, and from 1st October 2026 the time limit for bringing most tribunal claims doubles from three months to six. That means a decision you make badly now has a longer tail than it used to. Getting the process right takes a fortnight. Getting it wrong takes a year and costs considerably more than a fortnight of advice.
The long-term sickness you do not know how to handle
Someone goes off sick and stays off. You do not want to seem heartless, so you leave them alone. Six months later you have no medical evidence, no record of contact, no idea when they are coming back, and no lawful route to a decision. The answer was three sentences and a stay-in-touch call at week two.
The pay conversation that becomes a grievance
Two people doing similar work on different money, one of them finds out, and what started as a pay question becomes an equal pay or discrimination complaint. At five staff there is nowhere to hide from this, and no HR person to take the meeting.
Frequently asked questions
Is there a minimum number of employees before employment law applies?
No. The main obligations apply from your first employee. There are a small number of size-related differences, for example the rules on collective redundancy consultation only bite at twenty or more proposed redundancies, but the everyday requirements around contracts, discrimination, pay, working time, holiday and dismissal apply to a business with one member of staff exactly as they apply to one with a thousand.
Can I just use a template contract I found online?
You can, and it is better than nothing. The risk is that a free template is written for a generic employer and will not reflect how you actually operate: your hours, your notice periods, your probation arrangements, whether you can vary shifts, what happens to holiday on leaving. When a contract is tested it is tested on the specifics, and the specifics are what templates leave blank. Also check when it was last updated. A contract written before the Employment Rights Act 2025 will be out of date in several respects.
When should I hire an actual HR person?
Usually somewhere between twenty-five and thirty-five staff, or earlier if you are in a sector with high turnover and constant recruitment such as hospitality or care. Below that, an outsourced arrangement gives you a wider range of experience for a fraction of a salary. The question is not really headcount, it is how many hours a month you are spending on people problems and whether they are the right hours.
I have five staff and nothing has ever gone wrong. Do I really need this?
Nothing going wrong is not the same as nothing being wrong. Most of the problems we find in a compliance audit have been sitting there for years without causing trouble, which is exactly why nobody fixed them. The cost of finding out during a tribunal is not comparable to the cost of finding out during an audit.
If you have five employees and you are not sure where you stand, book a free 15-minute call and we will tell you straight. If the answer is that you are fine and you do not need us yet, we will say that too.