London, 12 February 2026: This Valentine’s Day, Employment Hero, the global leader in HR, hiring and payroll software, is celebrating the heart of the UK economy: British small and medium-sized businesses (SMEs).

New research commissioned by Employment Hero, surveying 1,047 UK business leaders, reveals that running a business is truly a labour of love. Despite significant personal sacrifices, 85% of SME leaders say that if given the chance to turn back the clock, they would do it all over again.

The findings highlight the personal cost of entrepreneurship. Almost all SME leaders (94%) say they have made sacrifices because of their business. Two in three (67%) report sacrificing time for themselves, while over half (55%) say they have sacrificed time with their partner.

Yet despite these pressures, business ownership remains deeply meaningful. When asked how running a business makes them feel, SME leaders most commonly cited purpose, fulfilment and pride.

Resilience in the face of adversity

The research follows a challenging period for SMEs, marked by the impact of measures introduced in the 2024 Autumn Budget. Throughout 2025, higher National Insurance Contributions and new employment law changes weighed on business confidence and hiring decisions.

This is reflected in the national employment picture. Latest ONS figures, which largely reflect the trends of large businesses, show payrolled employees fell by 184,000 (0.6%) year-on-year by December 2025, while unemployment rose to 5.1%, the highest level since 2021. 

However, Employment Hero’s SME labour market data tells a different story.. Analysis of real-time employment data from 117,000 employee records shows SME hiring increased by 2.5% year-on-year by the end of 2025. The data also highlights the impact of policy uncertainty: month-on-month employment growth fell to 0.8% in December 2024 following the announcement of NIC increases and to -1.1% in April 2025 when the changes came into effect. Despite this volatility, British small businesses have continued to take risks and provide employment opportunities.

Giving back to the community

To celebrate the heart of the UK economy and the vital role small businesses play in local communities, Employment Hero and their mascot Big Ears will be handing out letters of appreciation at the England v Scotland match on 14 February, encouraging fans to show support for their favourite small businesses this Valentine’s Day.

Commenting on the research, Kevin Fitzgerald, UK Managing Director at Employment Hero said:

“This Valentine’s Day, we wanted to shine a light on the real love story driving Britain’s economy – the unwavering commitment of small business owners to their companies and their teams. These are people who’ve sacrificed time with loved ones, personal wellbeing and financial security to build something meaningful.

“They’ve weathered one of the toughest years in recent memory, facing rising costs, policy uncertainty and a contracting national labour market. Yet our data shows they haven’t given up. While the broader economy has seen employment fall, SMEs have continued to take risks and invest in people.

“That 85% would do it all again speaks volumes about the resilience and determination of Britain’s small business community. Even when it costs time and relationships, the love for their business endures. That’s the kind of commitment worth celebrating and it’s why SMEs remain the beating heart of the UK economy.”

LONDON, 9 February 2026: The Government’s apprenticeship reforms could unlock a youth hiring breakthrough or fall victim to bureaucracy. New research from Employment Hero, the global leader in HR, hiring and payroll software, shows 73% of SME leaders are ready to take advantage of new support announced in last year’s Autumn Budget. The same data also reveals a warning sign: 43% say navigating the apprenticeship system is too complex, threatening to deter them from hiring.

With 872,000 young people currently not in education, employment or training (NEET) – the highest level in over a decade – apprenticeships represent a proven solution with 78% of employers having experienced increased productivity through apprenticeships. However, for the UK’s 5.7 million SMEs, the message is clear: financial support alone won’t drive uptake if administrative hurdles remain. 

A perception shift

The survey also highlights that the perception of entry level career paths has shifted, with 78% of leaders holding a positive view of apprenticeships. The data suggests a ‘blended’ talent model is emerging: 46% of SMEs value apprenticeships and degrees equally, while 37% now value the vocational route more, leaving only a small minority (11%) who view them as less valuable.

“73% of SMEs want to embrace the Government’s apprenticeship push. That’s great news and highlights that the apprenticeship reform has the potential to help solve the youth employment challenge that currently exists in the UK economy.” Kevin Fitzgerald, UK Managing Director at Employment Hero, said. 

“There is clearly an appetite from SMEs to give apprentices a key role in driving their businesses forward. This has to be matched by the Government to improve access and remove the unnecessary red tape that might hold SMEs back from the productivity gains on offer with the apprenticeship scheme.”

There’s a conversation happening in many accounting practices across the UK.

It’s happening over morning coffees, in partner meetings, and in the quiet moments between client calls:

“What do we do about AI?”

With Making Tax Digital (MTD) for Income Tax launching in just a few months, affecting 864,000 sole traders and landlords in its first phase alone, in these conversations you might also find a realisation being shared:

“I don’t think we can avoid AI any longer.”

And this is what we discuss in this blog, as follows:

3 types of practice, a shared challenge

The maths of MTD for Income Tax’s quarterly update and digital tax return workload is simple: one annual client interaction becomes five, each with its own data gathering requirements, deadline, and potential penalty.

It’s less about when you engage with AI, but whether you’ll do so on your terms—or be forced to react when you’re overwhelmed in a few months’ time.

Among other things at the upcoming Sage AI Roadshows, supported by AccountingWEB, the results of recent joint research will be revealed. It’s helped create three broad archetypes, as follows. Which best fits with you and your practice?

Strategic Adopters

These represent roughly 40% of practices. These firms have moved beyond simply sourcing and applying AI tools. They’re building systems. Isolated experiments have evolved into firm-wide implementations, automating the likes of client onboarding, document intake, and compliance workflows.

For these Strategic Adopters, the challenge is around optimisation: how do they scale what’s working, maintain data governance, and ensure their team keeps pace with the technology?

The danger for this group is complacency. Being ahead today doesn’t guarantee staying ahead tomorrow.

Cautious Observers

These make up another 40%. They see the potential of AI. They’ve perhaps experimented with tools like ChatGPT for drafting emails or summarising documents. But they haven’t made the leap to systematic adoption.

Their concerns are legitimate and revolve around reliability, accuracy, security, and professional standards. They want to know that AI won’t embarrass them in front of clients or create compliance risks.

What they need isn’t to hear yet more hype about AI’s possibilities. They need practical guidance on safe experimentation, clear use cases, and honest conversations about limitations.

Digital Traditionalists

These comprise the remaining practitioners. These people have seen technology trends come and go and they’re not opposed to change. They’re simply unconvinced that this particular change is necessary or beneficial for their practice.

Many run successful, established firms built on relationships and expertise. AI leaves them feeling ambivalent—it potentially threatens what they’ve built but it might also enhance it.

For this group, the starting point must be stress reduction and workload management, not transformation. They need to see AI as a tool that supports their existing strengths, not one that renders them obsolete.

Your invitation to act

Reading about AI adoption is no substitute for experiencing it.

That’s why Sage, supported by AccountingWEB, is launching AI roadshow events, beginning in March 2026 at Bristol, and continuing to Manchester and London events in April.

These events are definitely not sales pitches. The goal is practical, workshop-style sessions designed to meet you where you are. For example, you will leave with a structured 90-day playbook for practical AI adoption.

Each event features dedicated tracks tailored to different levels of AI readiness, led by a combination of Sage specialists, independent experts, and—crucially—your accounting peers who’ve already walked this path.

Strategic Adopters will find sessions focused on building strong data governance foundations, automating core practice processes end-to-end, and creating blueprints for firm-wide AI systems. This is where you move from isolated use cases to integrated operating models.

Cautious Observers will discover practical demonstrations of AI’s impact on everyday practice life—speeding up email drafting, summarising client calls, preparing queries before reviews, and improving routine admin. You’ll leave with clarity on where early wins can be achieved and practical guidelines for safe team adoption.

Digital Traditionalists will experience a confidence-building introduction focused on reducing stress and lightening workloads. You’ll see how basic tools can help manage tasks, plan workloads, and draft routine communications without disrupting what already works. Every attendee will leave with zero-cost use cases they can implement immediately.

Finding your starting point today

But what if you can’t wait?

The immediate path forward looks different depending on where you’re starting from, but certain principles apply universally.

Strategic Adopters: Your next frontier is systematic data governance and cross-practice integration. Individual AI wins are valuable, but firm-wide systems that maintain consistency, security, and quality control are what separate sustainable advantage from scattered experiments. Focus on creating operating models that scale, not just tools that work.

Cautious Observers: Your priority should be identifying two or three high-value, low-risk use cases where AI can deliver immediate benefits without threatening professional standards.

Email drafting via AI assistants like Sage Copilot, call summarisation, and working paper preparation are natural starting points. Establish clear guidelines for your team about appropriate use, then expand from there. The key is moving from passive observation to active experimentation within defined boundaries.

Digital Traditionalists: Start with pain points. What administrative tasks consume disproportionate time? What repetitive work could be streamlined without changing your fundamental approach to client service?

AI tools can handle routine communications, manage task scheduling, and create templates that preserve your voice and standards while reducing your workload. The goal isn’t transformation—it’s making each week feel lighter.

Final thoughts

Let’s be direct: attending an AI workshop is a professional necessity for anyone serious about their practice’s future. And it’s a great first step in any ongoing training. Events like the Sage AI Roadshow even deliver CPD.

The accounting profession has always adapted to change—from paper ledgers to spreadsheets, from desktop software to cloud computing. Each transition separated those who evolved from those who were left behind.

AI represents the most significant shift since the digitisation of records, but the timeline for adaptation is compressed. What took a decade with previous technologies has taken maybe a year or two with AI.

The Sage AI Roadshows offer something valuable: a structured opportunity to begin or accelerate your AI journey alongside peers who understand your challenges, supported by experts who can answer your specific questions, in a format designed for practical learning rather than theoretical discussion.

Whether you’re ready to scale existing AI implementations, prepare for cautious first steps, or simply want to understand what all the fuss is about, there’s a session designed for you.

Your people are probably using AI, whether your business has officially adopted it or not.

From drafting invoice reminders and summarising meeting notes in seconds, to getting help with prospecting templates or ideas, AI has crept into everyday work.

That’s the context for the AI Skills Boost, a UK government initiative designed to help millions of workers build practical, foundational AI skills by 2030. It’s delivered in partnership with major technology providers, including Sage.

It’s live right now. So, let’s take a look at what it could mean for you and your team:

What is the AI Skills Boost?

The question for most small businesses isn’t whether AI matters. It’s where to start, and how to embrace it without overwhelming your team.

AI Skills Boost is the answer. It’s available through the AI Skills Hub and is designed to help people understand and use AI productively, safely, and responsibly at work.

The pathway courses are designed for the real-world, in that they’re:

• Entry-level and non-technical
• Focused on productivity, not theory
• Free to access and self-paced
• Designed for everyday roles, not just IT teams

Individuals sign up directly through the AI Skills Hub and can choose from a range of options, some taking as little as 20 minutes to complete.

Completing the selected pathways also unlocks a digital AI skills badge, which learners can use on LinkedIn or email signatures.

Sage’s AI experience and expertise in the AI Skills Boost

As part of the AI Skills Boost, Sage has contributed an AI Fundamentals for Business pathway (note: free registration is required), which is included among the recommended foundational options on the Hub.

The pathway focuses on practical business scenarios, helping people understand where AI can support productivity and decision-making, as well as when it should (and shouldn’t) be used.

For small businesses already thinking about AI or unsure where to begin, it offers you a practical, low-risk starting point.

If you’d like a broader overview of how AI applies to small businesses (including common use cases and pitfalls to avoid) the Start Strong with AI for Small Businesses guide provides a simple introduction.

Why AI skills matter for your small business

There is no shortage of AI tools available to small businesses, but you may be uncertain.

Your team may worry about using AI incorrectly, may not know where it fits into their work, or may assume it’s only for the tech-savvy. Inevitably, you’ll end up with patchy adoption and miss opportunities.

AI Skills Boost is designed to remove that friction by:

• Building a shared baseline understanding across teams
• Increasing confidence in everyday AI use
• Helping businesses get more value from tools they may already have

In short, it’s about confidence before complexity.

What AI looks like in practice

In the Sage AI Action Workbook, there are examples of businesses that have made small changes to deliver fast, real results.

Tyne Chease, a UK food business, uses Sage Ai to support everyday finance tasks such as invoice chasing.

By automating part of a process they were doing manually, the business got paid up to seven days faster and saved around 14 hours of admin time every week.

There was no major transformation programme. No technical rebuild. Just one routine task improved with AI, resulting in clear, measurable benefits.

This is exactly what the AI Skills Boost is designed to support: helping teams see what’s possible, build confidence, and then decide what to do next.

How to use the AI Skills Boost effectively in your business

The programme works best if you treat it as a team-wide baseline, not a one-off experiment.

Use the AI Skills Boost by:

• Sharing the sign-up link internally
• Encouraging staff to complete a short foundational pathway
• Using it as a common reference point for future conversations about AI and digital tools

Because the training is flexible and self-paced, it can fit around busy schedules and helps those in your team start from the same understanding rather than learning in isolation.

How to get started with AI skills

AI adoption isn’t slowing down and it’s proving to be more than a flash in the pan.

Building foundational skills now means your team can adapt confidently, experiment responsibly, and make better decisions as tools evolve.

AI Skills Boost has arrived at just the right time. It’s free, flexible, and designed for real work, rather than abstract theory.

Start by exploring the AI Skills Boost on the AI Skills Hub, then dig down into Sage’s AI Fundamentals for Business pathway.

Employment Hero is prescribing a more productive approach to National Sickie Day.

The first Monday of February has a bit of a reputation and similar to Blue Monday, it’s not a good one. Widely known as National Sickie Day, it’s statistically the day when more UK employees are likely to call in sick than any other. 

For business owners and HR professionals it often becomes a familiar pattern each year; a spike in absence and a lingering suspicion that not everyone is genuinely unwell. Because, let’s face it, it’s rarely “just a cold”. More often, it’s a symptom of burnout, disengagement and depleted energy (at this time of year, when there’s little sun and days are still short, it’s not really a surprise, is it?). 

What is surprising, though, is how often these warning signs are ignored. Employment Hero’s Work That Works report found that employee wellbeing is the number one driver of productivity, yet days like National Sickie Day UK are still treated as an attendance issue rather than a wellbeing signal.

So what if we stopped treating National Sickie Day UK as a problem to be managed and started seeing it as a message to listen to? Instead of policing absence or bracing for staff shortages, forward-thinking HR teams can flip the script and use it as a catalyst to champion rest, flexibility and genuine connection. 

Why HR teams should rethink National Sickie Day

It’s time to stop playing cat and mouse with absenteeism. Instead of counting empty desks or tightening sickness policies, it’s a chance for forward-thinking HR professionals to get creative. And National Sickie Day UK is the perfect catalyst for a much needed wellbeing revolution. 

This revolution begins with understanding employee absenteeism and the reality is that “sickies” are often a survival tactic for employees running on empty.  Not convinced? We’ve got the numbers to back up this bold claim. In fact, Employment Hero data indicates that burnout is the real driver, with 28% of UK workers admitting to taking at least one sick day when they weren’t physically unwell and 17% taking more than one. When asked why, nearly half (49%) said they took a sick day because they felt mentally or emotionally exhausted, while 39% said they felt overwhelmed and needed a break.

So this leads to the bigger question of what is really causing this burnout. According to the data, in 2025 a quarter of employees didn’t use all of their allocated leave and 44% felt pressured to keep working during their time off. These stats are a sharp wake-up call. But by rethinking your approach to National Sickie Day  you can turn a moment of hidden burnout into an open conversation about sustainable working.

Prioritising wellbeing isn’t just fluffy HR talk; it’s a strategic move that pays dividends in morale, productivity and loyalty. When you show your team that you value their health over their physical presence in a chair, you build trust. And trust is the currency of high-performing teams. So by transforming this day from a statistic of “skiving” into a championing of rest, you’re not just plugging a leak, you’re rebuilding the foundation of your company culture. It’s about creating an environment where people don’t have to fake a flu to get the mental space they need to function.

Strategies for turning National Sickie Day UK into a wellness win

It’s clear that employee wellbeing is an area that could use a bit of TLC (but don’t worry, we’re not asking you to chase waterfalls). It’s really just about taking proactive steps to show your team you value them as people, not just as producers. 

Forget policing absences. Instead, use this day as a launchpad for a culture of genuine wellbeing. Here are five strategies to get you started.

Promote rest and recovery

Burnout plays a huge role in National Sickie Day being a thing. So perhaps it’s time for businesses to stop waiting for it to happen and instead reframe the conversation about noticing the signs and taking time off. National Sickie Day UK is the perfect time to open this conversation. 

Think about it, it’s important for your team to do their best work when they’re at work, but in order to do this, they also need some down time. So encourage your team to use their leave for proactive rest, not just for holidays or physical illness. Introduce the idea of mental health days and make it clear that taking a day to recharge is not just accepted but celebrated. When people know they can take a break without judgement, they don’t need to fake a cold.

Offer practical flexibility for your small team

For SMEs every team member counts, so while being ultra productive is what we’re all striving for most of the time, it’s also not sustainable to be at that level every single day. HR professionals and business leaders can showcase they understand their team’s needs by acknowledging this. 

If the first Monday of February is a low-energy day, lean into it. Where possible, offer flexibility. Flexible working could be in the form of letting people work from home or having more flexible hours (such as starting late or finishing early). For SMEs, flexibility doesn’t have to be formal or complex, it can be agreed quickly, communicated clearly, and adjusted to suit both business and employee. 

This small gesture shows you trust your team to manage their energy and their workload. It’s a powerful way to turn National Sickie Day UK from a day of absence into a day of autonomy and trust. For smaller businesses especially, this kind of autonomy can transform National Sickie Day UK from a spike in absence into a moment that strengthens loyalty, accountability and team morale.

Host wellness activities

Turn a day that can feel negative into something positive and find ways to encourage people to come into work. Some great ways of doing this include:

• A virtual mindfulness workshop. 
• A yoga session.
• Providing breakfast or lunch.
• Walking meetings. 

These activities send a clear message that you care about your team and their wellbeing. It shifts the focus from sickness to wellness and transforms a potentially negative day into a positive, team-building experience.

Make recognition a habit

Ironically, recognition could be one of the most underrated wellness and productivity factors, with the Work That Works report showing that of 20 productivity factors tested, recognition ranks 19th for importance among business leaders. But you shouldn’t be underestimating the power of a simple thank you. The report also shows that when employees feel their work is recognised, they are 33% more likely to go ‘over and above’ what is expected. 

National Sickie Day UK could be the perfect chance to up your recognition game. This could be as simple as shouting out team achievements and celebrating hard work through highlighting everyday wins. Whether it’s a quick message in the group chat or a small team award, regular recognition makes people feel valued…and it lifts morale in ways that spreadsheets can’t measure.

Open conversations about wellbeing

This might be the most important strategy of all. Use the buzz around National Sickie Day UK to start an open and honest conversation about stress, burnout and mental health in the workplace. 

This matters more than many businesses realise. Research from our Work That Works report shows that while business leaders rate employee wellbeing as the number one driver of productivity, it only ranks sixth on the list of priorities organisations plan to focus on over the next 12 months. 

There’s also a clear perception gap. Just 46% of employees rate their organisation highly (8–10 out of 10) for focusing on wellbeing at work, dropping to 42% among workers aged 55–64.

National Sickie Day is a timely opportunity to close that gap. Creating a safe space for your team to acknowledge when they need support doesn’t just help reduce unplanned absence, it gives HR professionals and business owners valuable insight into where improvements are needed. Run a survey, host a town hall, or encourage managers to check in with their teams. Building a culture where it’s safe to talk about these challenges is the ultimate antidote to “pulling a sickie” and a crucial step towards a more productive, resilient workplace.

The best cure for National Sickie Day is a healthier culture

This year, let’s stop dreading the first Monday of February. National Sickie Day doesn’t have to be a symbol of low morale and burnout. Instead, it can be an opportunity to do things differently and a chance to treat the cause rather than managing the symptoms.

When large numbers of employees feel the need to check out, it’s rarely about dodging work. It’s a signal that something deeper needs attention. By acknowledging this, HR teams and business owners can transform National Sickie Day from an annual headache into a genuine wellbeing check-up for their teams. 

So the challenge for business owners and HR managers is 2026 is clear; will you let National Sickie Day be another epidemic of absenteeism or will you use it as a springboard towards a healthier way of working? Because when wellbeing is taken seriously, fewer people feel the need to pull a sickie… and that’s one workplace trend you want to be contagious. 

Want to know more about managing absenteeism and boosting employee morale? Employment Hero has you covered.

When an employee leaves your business, either voluntarily or through termination of employment, the transition period can be difficult to traverse. As a business owner or HR professional, protecting the business is a key objective, but you also need to handle the exit professionally. 

This is where garden leave comes in. 

Far from being a paid holiday, garden leave or “notice period leave” as it’s also called, allows you to safeguard sensitive company information, protect client relationships and ensure a smooth handover when a key team member is on their way out. 

Want to know more? We’ve got you covered. We’ll cut through the noise and show you how you can utilise garden leave to protect your business. 

What is garden leave UK?

Okay, let’s start with the basics, by considering what is garden leave UK? Despite what the name suggests, it actually has nothing to do with gardening. It’s essentially when an employee, after resigning or being terminated, is asked to stay away from the workplace during their notice period. Although the employee continues to get paid during this time, they are not required to work. It’s also important to remember that they are also not allowed to start a new job. 

Think of it as keeping a player on the bench. They’re still part of the team (and paid like it), but they aren’t on the field making plays…or passing your playbook to the opposition.

But it’s not  for everyone. You probably don’t need to put a junior admin assistant on notice period leave. This is a tool for your high-stakes players. Some situations when it might be worth utilising it include: 

• Senior Executives: Leaders who hold the keys to your strategic roadmap and sensitive data.
• Sales and Accounts: People with direct access to your client lists. If they are leaving for a competitor, you want to cut off their access to your database immediately to protect those relationships.
• The “competitor jump”: Any role where the employee is leaving to join a direct rival. Notice period leave keeps them out of the market for the duration of their notice, meaning their knowledge is slightly less fresh by the time they start the new job.

Why do employers use garden leave?

It’s a good question; why would you continue to pay someone to not work when you could still make use of their skills? The simple answer is because it protects your business. 

Notice period leave can be used as a proactive way to safeguard your business during a sensitive transition. Here are a few reasons why many business owners and HR professionals opt to put exiting employees on garden leave:

• Protects sensitive information: Employees often leave with access to financial data, strategic plans, client insights and product roadmaps. Notice period leave cuts off access immediately, preventing intentional or accidental leaks that could benefit competitors.
• Safeguards client relationships and IP: Client trust is one of your most valuable assets. Paying your people to not work their notice period creates a “cooling-off” period that lets you transfer relationships smoothly and protects your intellectual property by ensuring the departing employee isn’t contributing to new projects.
• Stops an immediate jump to a competitor: A departing employee walking straight into a competitor’s office is a major risk. Garden leave keeps them under contract during the notice period, making their knowledge less current—and less valuable—by the time they start elsewhere.
• Maintains workplace stability: Departures can cause distraction, negativity or even poaching attempts. Asking employees to not work during their notice period removes the potential disruption, allowing for a clean, controlled transition and keeping the team focused and morale high.

How does garden leave work: The step-by-step process

So, you’ve decided garden leave is the right move. How do you actually make it happen? 

The good news is that once you have the legalities in order, implementing notice period leave should be a straightforward, professional process. No drama, just clear communication. 

Here’s a five-step process to help you as a business owner or HR professional action a compliant and smooth exit period. 

1. Check the contract: Before you do anything, pull up the employment contract. Does it have a garden leave clause? If yes, you’re in a strong position. If not, you may need to negotiate with the employee to reach an agreement.
2. Hold a formal meeting: Once the end of employment is confirmed, arrange a private meeting. Explain your decision to place them on notice period leave and refer to the relevant clause in their contract.
3. Put it in writing: Follow up the meeting with a formal letter. This letter should clearly state that they are on garden leave, the start and end dates and their obligations during this period.
4. Cut off access: On their last day in the office, professionally revoke their access to all company systems, email and physical premises. This is a critical step in protecting your data.
5. Manage the handover: Ensure you have a plan to transfer their responsibilities and client contacts. They should remain available to answer questions to help with this transition, as stipulated in the contract.

How to keep garden leave compliant

So, you want to use garden leave to protect your business. Smart move. But before you send anyone home to tend their roses, you need to make sure your legal foundations are rock-solid. 

This isn’t about ticking boxes; it’s about making sure your best-laid plans don’t backfire and land you in a legal mess. Here’s what you need to know to stay on the right side of UK HR employment law.

The golden rule: Get it in the contract

In the UK, you generally can’t force an employee onto garden leave unless you have a specific, well-written clause in their employment contract.

Why? Because employees have an implied “right to work.” Taking that away, even while paying them, can be seen as a breach of contract on your part. If you breach the contract first, the employee might be able to claim constructive dismissal. This could make all those other protective clauses you rely on—like non-compete agreements—completely unenforceable.

A solid garden leave clause gives you the express right to ask an employee to stay home during their notice period while remaining on the payroll. It’s your legal trump card.

Reasonableness is your best defence

But having a clause isn’t a blank cheque to do whatever you want. To be enforceable, the terms of garden leave must be reasonable. If you’re challenged in court, a judge will look at whether the restrictions you’ve imposed are genuinely necessary to protect your legitimate business interests.

Two key areas where reasonableness is tested are:

• Duration: The length of the garden leave should be appropriate for the employee’s role and the risk they pose. A three-month notice period on garden leave for a senior executive with access to your 5-year strategy is likely reasonable. The same period for a junior team member? Probably not. An excessively long period can be viewed as an unfair “restraint of trade,” making the clause invalid.
• Terms: You must continue to provide the employee with their full salary and all contractual benefits—pension contributions, health insurance, car allowance, the lot. Failing to do so is a clear breach of contract from your side, giving the employee a free pass to walk away from their obligations.

Think of it this way: garden leave is a shield to protect your business, not a stick to punish a departing employee. Keep it fair, keep it reasonable and you’ll keep it enforceable.

Best practices for employers

It’s clear that garden leave can be a game changer when it comes to protecting your business. But if you want to ensure it works for you, you need to have a solid game plan in place. 

So let’s move past the theory and look at best practices for businesses who want to utilise notice period leave. 

Include garden leave clauses in employment contracts

For businesses, having a bullet-proof employment contract is always important. But don’t forget to add a garden leave clause in. This should be clear, specific and ready for action when you need it most.

We don’t like to overcomplicate things at Employment Hero, so here’s how you can draft a clause in your contract that covers your business. 

• Be explicit: Don’t be vague. The clause must clearly state your right to place an employee on notice period leave for all or part of their notice period. It should specify that you can require them to stay away from the office, have no contact with clients or colleagues and return all company property.
• Keep it reasonable: Courts can throw out clauses they see as an unfair “restraint of trade.” The restrictions must be necessary to protect legitimate business interests. A 12-month garden leave for a junior employee won’t fly. Align the potential duration with the employee’s seniority and access to sensitive information.
• Cover all your bases: Remember to state that the employee will continue to receive their full salary and all contractual benefits. This shows you’re holding up your end of the bargain, which is crucial for the clause to be enforceable.

Manage the employee, not just the process

It’s never easy when someone leaves your business and emotions sometimes run high. But try not to forget that this isn’t just a process, people are involved too. The good news is that navigating this is relatively simple, don’t just manage the process, manage the employee.

Here’s how you can do just that:

• Set clear expectations in writing: Once you’ve made the decision, send a formal letter. Reiterate their obligations: no starting a new job, no client contact and they must remain available for handover questions. This written record is your proof of a professional process.
• Control the handover: The employee holds valuable knowledge. Don’t let it walk out the door. Use this period to facilitate a structured handover. Schedule calls if needed to ensure their responsibilities are smoothly transferred to the team. You’re paying them, so it’s fair to expect their cooperation.
• Manage the narrative: Control how the exit is communicated to the rest of the team. You can simply state that the employee is leaving and that a transition plan is in place. This avoids gossip and keeps the team focused and motivated.

Take control of your exit strategy

Garden leave isn’t just some dusty HR policy or a legal hoop to jump through, it’s your insurance policy against lost data, poached clients and messy exits. When used correctly, it turns a potential vulnerability into a period of controlled transition.

We know it feels like a cost, paying someone to do nothing goes against every instinct you have. But compare that to the cost of a competitor getting your strategy six months early. It’s a no-brainer.

By implementing notice period leave, you’re not just protecting your bottom line; you’re setting a standard of professionalism. You’re showing your team that you value stability and that you take your business interests seriously. You get a smooth handover, a cooling-off period and the peace of mind that comes with knowing your intellectual property is safe.

Want to know more about how you can ensure your business has a solid employee exit strategy? Talk to our HR Advisory service, or book a demo today.

It’s a scenario that can make any business owner’s stomach drop. Your payroll manager, the one who holds the keys to paying your team, suddenly leaves. Questions like “how will everyone get paid” or “what about tax compliance and deadlines” are floating around in your mind. We get it, it’s not an ideal situation. But before you spiral, there is a solution. And it’s called payroll contingency planning. 

Having a process or backup in place helps businesses turn unexpected challenges into opportunities. For business owners and HR professionals, it’s an opportunity to build a more resilient system that keeps running smoothly, no matter what. 

Sounds good, right? We’ll dive into the basics of payroll contingency planning and how you can implement it in your business. 

What is a payroll contingency plan?

As a business owner or HR professional, you know better than anyone that having a backup for everything is essential. This is what a payroll contingency plan is, it’s there for when things go sideways. Think of it as your business’s emergency payroll playbook. It outlines exactly what to do when your normal payroll operations are disrupted, so you can keep everything running smoothly. 

The purpose is simple: to be prepared. Whether it’s a technical glitch, a key person leaving suddenly or a major system failure, it ensures your team gets paid correctly and on time, no matter what.

It’s important to remember that none of this is negative or planning to fail. No. It’s simply about building a resilient business. It’s a way of protecting business continuity, safeguarding the trust you’ve built with your employees and helping you to manage your legal responsibilities during a disruption.

In simple terms, payroll continuity transforms a potential disaster into a manageable situation, giving you the confidence to handle any challenge that comes your way. 

Why UK businesses need to have a payroll contingency plan

Payroll is one of the most critical functions for any business and it plays a huge role when it comes to building trust between employer and employee. Yet it’s often something that is taken for granted or “set and forget” until something goes wrong. But with 70% of businesses running it in house, not having a backup plan seems like a rookie mistake. 

Anything from system failures to key staff absences and unexpected disruptions can quickly turn payroll into a major risk, affecting employees, compliance and business continuity. In case you’re still on the fence about investing valuable time into creating a payroll contingency plan, here’s exactly why having one in place is essential for UK businesses. 

Protect employee trust and morale

We don’t need to tell you that your employees are your most valuable asset because you already know, so looking after them should be top of your priority list. And the simple fact is that they rely on you to pay them on time, every time. This is one of the best ways for you as an employer to build trust and show that you value your team. 

But we also know that 67% of businesses are concerned about employee complaints when it comes to payroll; a missed or delayed payday creates immediate stress and uncertainty. 

A payroll contingency plan demonstrates that you respect your team and have their backs, no matter what challenges arise. This fosters loyalty and keeps your team focused and motivated. When your team isn’t concerned about getting their next payslip, they’re able to put more focus on the job they’re paid to do. 

Stay compliant

This is a big one; compliance. Anyone who has run payroll before knows that managing it comes with a lot of responsibility. From tax contributions to GDPR, the rules are complex and mistakes are costly… and let’s be honest, mistakes are something you want to avoid like the plague. 

The unfortunate reality is that disruption can easily lead to missed deadlines, incorrect filings and, yep you guessed it, hefty fines. Having a backup plan helps you manage your obligations, protecting your business from legal trouble and damage to your reputation. 

Keep your business running smoothly

The sudden departure of a payroll manager, a system outage or any other crisis can bring operations to a grinding halt. It’s not ideal. So having a payroll contingency plan in place is your key to business continuity. It maps out who steps in and what they need to do to keep the process moving. This prevents a single problem from derailing your entire operation, minimising downtime and financial loss.

Build resilience and a competitive edge

As a business owner, you know all about being resilient. And you’ll also know that how your business handles a crisis says a lot about its strength. Nothing says resilience more than a company that can navigate disruptions without missing a beat. 

It instills confidence not just within your team, but also with external stakeholders and future talent. In a competitive market, being the employer who is always prepared gives you a powerful advantage. It helps you attract and retain the best people, who want to work for a stable and reliable business.

How to create a payroll contingency plan

So we know why having a payroll contingency plan is important, but that’s not particularly helpful without knowing how to create one. Don’t worry, we’ve got that covered too. 

Identify payroll risks and dependencies 

The first step is to take a look at your current processes and establish where your payroll function is most vulnerable. Because, let’s be real, you can’t fix something when you aren’t sure what elements are broken. 

Look for cracks in your current process and identify every potential point of failure. Ask yourself the tough questions, such as:

• What happens if your payroll manager is off sick on payday? 
• What if your internet goes down, your payroll software fails or your systems are compromised by a cyber incident?

Map out your entire payroll workflow from start to finish, highlighting every person, system and tool involved. If any step relies on a single individual or a single piece of technology, you’ve identified a risk. 

Common vulnerabilities include:

• Having one payroll manager with no trained backup.
• System outages or software failures.
• Loss of access to HMRC or banking platforms.
• Poorly documented processes.

Being honest about these weaknesses is essential. Understanding where your real risks lie allows you to design a payroll contingency plan that addresses real-world disruptions and ensures payroll can continue even when the unexpected happens.

Document payroll processes

A core part of payroll contingency planning is comprehensive documentation. Yep, you guessed it, this means getting every part of your process out of your manager’s head and onto paper. 

This document should outline how payroll runs from start to finish, including: 

• Data collection and approval workflows:  Lay out how timesheets, overtime, expenses and leave are collected, approved and processed each pay cycle. Spell out who signs off at each stage and where that information lives.
• Pay calculations, deductions and statutory payments: Break down pay calculations, including handling base pay, overtime, bonuses, deductions and statutory payments. Be specific about which calculations are automated and which need a manual check. Include links or screenshots for payroll software and list common issues or exceptions you run into.
• PAYE, RTI submissions and pension reporting: Cover statutory requirements in detail. Document how you process PAYE, make RTI submissions and manage pension reporting. Include file formats, upload steps and reporting frequencies. Highlight who is responsible for each compliance step.
• Key deadlines and payroll calendars: Add a section on key deadlines and create a payroll calendar every backup can reference. This should flag dates for data submission, approval deadlines, paydays and HMRC reporting.

Backup systems

Technology is great (we are huge advocates for technology and automation), but the reality is that things can and do go wrong occasionally. Therefore, you need redundancy built into your infrastructure. This means having secure backups of your payroll data that are independent of your main system. If you use on-premise software, move backups to the cloud. If you are already cloud-based, understand your provider’s backup protocols.

Establish alternative workflows for payment processing. If your primary banking portal is down, do you have a secondary method to transfer funds? Having a Plan B for the technical side of things keeps the engine running when the main road is blocked.

Appoint and train backups

Relying on just one “payroll wizard” is a risky move. If that person leaves, goes on holiday or falls ill, your payroll knowledge may leave with them. The answer? Spread the expertise and build real backup into your system.

​Identify exactly who will take over payroll responsibilities if your manager is unavailable. This could be someone from HR, finance or operations or even a trusted external payroll provider. 

But it’s not enough to simply name a backup on paper. In order for a backup to be successful, you need to give them real, practical training. Bring your backups into the payroll process ahead of time. Let them shadow, run test pay cycles and tackle different scenarios so they’re ready to step in without missing a beat. The right handover can mean the difference between a smooth payday and an operational mess.

Regular training and exposure to the full payroll process ensures that your backups are not only ready in theory but confident and capable when it really matters. This step is what transforms contingency planning from a tick-box exercise into a true operational safeguard.

Define communication and escalation procedures

It’s all well and good having procedures in place for what to do when something goes awry, but without effective communication all this hard work amounts to very little in your team’s eyes. This is why clear and proactive communication is non-negotiable. Silence or mixed messages can quickly erode employee trust, spark rumours and leave your team feeling unsupported. Therefore, your payroll contingency plan needs to make communication with the wider team a priority, not an afterthought. 

How can you do this? We’ll show you.

• Assign a main point of contact: Typically someone in HR or a senior leader. This is the person who is responsible for informing employees if pay is delayed, payroll changes are happening or issues have cropped up. This person becomes the trusted source for accurate, timely updates, stopping misinformation before it starts.
• Be clear on how updates will be delivered: This will vary business to business, so opt for what works best for you, but examples include; using email for urgent company-wide notifications, keeping a dedicated channel in your HR platform for payroll news or making quick announcements in team meetings. Choose the method your team already relies on, and don’t be afraid to repeat key messages to make sure everyone gets the memo.
• Prioritise transparency: Transparency makes a difference. Be honest about what happened, what’s being done, and when employees can expect resolution. Even a short update saying, “We’re on it, here’s what you need to know,” can reduce stress and show you’re in control. Simples.

But communication goes beyond just informing your team. It’s also essential to have a backup contact in finance or operations to deal directly with HMRC, pension providers or software vendors. This division of roles means employees get focused support, while technical issues are handled by the right expert.

Assigning these responsibilities upfront keeps information flowing, avoids finger-pointing and strengthens your team’s trust in tough moments. When people know exactly who to turn to and what to expect, you turn potential chaos into calm, confident leadership.

Test and review

A plan in theory is fine, but you need to know it works in practice. So schedule a time to test your contingency plan at least once a year. You can do this by running a simulation where your primary payroll professional steps aside and the backup team runs a mock payroll. 

By testing and reviewing your payroll contingency plan, you can establish where the gaps are and find ways to fix them before the event actually happens. It’s important to remember that you need to update your procedure whenever you change software, update internal processes or when legislation changes. Keep it living, breathing and ready for action.

Steps to take when your payroll manager leaves

You’ve got a payroll contingency plan in place, but it’s still pretty daunting when your payroll manager leaves unexpectedly. Because we all know that just because something hasn’t gone according to plan, it doesn’t mean paying employees on time and compliance go out the window. Acting quickly and methodically will help you maintain control, avoid disruption and protect your business.

We’ve broken down the steps you need to take to ensure everything keeps running smoothly if your payroll manager leaves suddenly. 

Immediate actions

Your first move is to stabilise the ship. You can’t fix everything in five minutes, but you can stop the situation from spiraling.

Assess the state of operations

First things first, don’t panic. Before you dive straight into “fixing mode” take a moment to get a clear understanding of where you stand. A few things you should prioritise include: 

• Logging into your payroll system: Do you have access? If not, getting administrative rights is your number one priority. 
• Checking the status of the current pay cycle: Are you mid-run? Have hours been approved? Are there tax deadlines looming in the next few days? You need to know exactly what is due and when. 
• Identifying any critical gaps: This includes gaps in data or access so you can address them before payday arrives.

Communicate with transparency

We’ve said it before and we’ll say it again: be transparent. As soon as the team hears the payroll person has gone, the rumour mill kicks in with talk of missed pay and cash flow issues.

So get ahead of the narrative and make sure your team knows what’s happening. It’s important to remember that you don’t need to share every detail, but you should reassure your employees that payroll is under control and they will be paid on time.  Be honest with your stakeholders and department heads too. Showing you are proactive builds trust and keeps everyone calm while you sort out the logistics.

Short-term solutions

Once you’ve dealt with the immediate concerns, it’s time to think about short term solutions. 

Activate your backup support

This is when you’ll really feel the benefits of having a backup team trained and ready to go. Clear their other responsibilities and move them into the payroll function immediately, this gives them the time to focus on ensuring everyone is getting paid on time and things are running smoothly. 

If you don’t have an internal backup, don’t try to wing it. Reach out to an external payroll bureau, an accountant or a freelance specialist and opt to outsource payroll. Paying for expert help now is far cheaper than fixing mistakes later. 

Lean on your documentation

Remember earlier we told you to document everything? Well this is when you’ll be grateful for it. Follow the documented processes step-by-step. Do not deviate or try to “improve” things right now. Your goal is to replicate the standard process to support compliance and accuracy.

Long-term strategies

Surviving the crisis is great, but preventing the next one is better. Once the dust settles, use this experience to build a more resilient business.

Hire a new payroll specialist

You’ve made it past the initial hurdles and things are running as they should, but you also know the current situation isn’t a permanent solution. So what next? 

Now is the time to bring in a skilled payroll professional who can take ownership of the process. The specific person you hire and the job description you put out will be personal to your business. But a few things to look for include:

• A specialist with experience handling payroll for businesses of your size.
• Someone who understands PAYE, RTO submissions and UK specific requirements.
• Great organisational skills and attention to detail.
• Familiarity with your existing payroll software. 

During onboarding, give your new hire access to all documentation, encourage shadowing with key team members and set clear expectations from day one. A strong onboarding plan helps them hit the ground running so your payroll process doesn’t miss a beat.

Invest in technology

We live in a tech-first world and businesses can be taking advantage of this to make their lives (and the lives of their team) easier. 

While technology can never replace people, it can be an integral support if the worst happens and your payroll manager leaves. Move toward and implement cloud-based payroll platforms that automate calculations, tax filings and reporting. Modern tech stacks reduce the manual workload and make it easier for anyone to step in and manage the process. By investing in automation, you reduce your reliance on individuals and protect your business against future disruptions.

Review and update your plan

Treat this event as a live stress test for your business continuity. Consider: 

• What went right? 
• Where did you stumble? 
• Did you have the passwords you needed? 
• Was the documentation accurate? 

Be honest about the failures and use them to update your payroll contingency plan. A plan that sits in a drawer is useless; it needs to evolve based on real-world challenges.

Turning payroll challenges into confidence

When a part of your payroll process falters, it’s easy to feel like chaos will ensue. But with the right approach, you can flip that feeling on its head. Strategic payroll contingency planning is more than just insurance, it’s a blueprint for reliability and resilience. 

Failing to put a payroll contingency plan in place is not only opening your business up to missed pay deadlines and compliance headaches, but it’s also a missed opportunity to showcase strong leadership. 

Instead, map out every step in your payroll process, use cloud-based systems to centralise records to ensure that information is accessible, even if someone leaves. And don’t forget that payroll software can do a lot of the heavy lifting, but effective communication keeps your team confident. 

The long-term impact is clear. You cushion your business from unexpected shocks, keep your people paid on time and foster a culture that values planning over panic. That’s not just compliance, that’s confidence and it’s how you set your business apart as a place where people know they matter.

Looking to streamline and enhance your current payroll processes? Discover how Employment Hero can help.

Hiring is the lifeblood of your business. Every new person you bring on board has the potential to supercharge your growth, but getting it wrong can be a costly setback. In today’s competitive job market, UK employers are finding it tougher than ever to attract and retain top talent. The old ways of simply posting a job and waiting for the applications to roll in just don’t cut it anymore.

You need a smarter approach. The first big question you face when a role opens up is: do you look inside your own walls or cast your net into the wider world? This is the core dilemma of internal vs external recruitment. Both paths have their own set of rewards and risks, and choosing the right one can make all the difference. This guide will help you cut through the noise, understand the trade-offs, and build a hiring strategy that fuels your business ambition.

Internal vs external recruitment: Key differences at a glance

Before we dive deep, let’s get a clear overview. Understanding the fundamental trade-offs between hiring from within and searching externally is the first step to making a smarter decision.

Factor	Internal recruitment	External recruitment
Cost	Lower (minimal advertising and agency fees)	Higher (advertising costs, agency fees, higher salary negotiations)
Speed	Faster (smaller candidate pool, quicker process)	Slower (larger candidate pool, extensive screening and interviews)
Cultural fit	High (candidate already understands the company culture)	Lower (risk of culture clash, requires careful assessment)
Innovation	Limited (may reinforce existing ways of thinking)	High (brings in fresh perspectives, new ideas, and diverse skills)
Risk	Lower (known performance and work ethic)	Higher (relies on interviews and references, performance is unproven)
Scalability	Limited by current talent pool	High (access to a much wider talent market for rapid growth)

This table gives you a snapshot, but the real power comes from knowing how to apply these differences to your unique situation.

What is the difference between internal and external recruitment?

At its heart, the difference is simple: one looks inward, the other outward. But the business implications of that choice run deep, affecting everything from your budget to your company culture. A complete recruitment process guide will cover both, but it’s crucial to understand them as distinct strategies.

Internal recruitment explained

Internal recruitment is the process of filling a vacancy by promoting or transferring an existing employee within your company. You’re tapping into the talent you already have. While advertising internally it’s not legally required in the UK, it’s a good idea to, as you’re less likely to break the law by discriminating (even when you don’t mean to) and you open yourself up to a wider pool of talent.

Common methods include:

• Promotions: Moving a high-performer into a more senior role.
• Transfers or secondments: Shifting an employee to a different team or department to fill a need or develop their skills.
• Employee referrals: Your current team recommending candidates from their network (though this often blurs the line with external).
• Internal job boards: Advertising the role exclusively to your current employees.

These internal recruitment strategies leverage the knowledge and loyalty you’ve already built.

External recruitment explained

External recruitment involves looking outside your organisation to find a new hire. This is the more traditional approach, where you open up your search to the general public or specific talent pools.

Typical methods include:

• Job boards: Posting on sites like LinkedIn, Indeed, and other industry-specific boards.
• Recruitment agencies: Partnering with agencies that specialise in finding candidates for you.
• Social media: Using platforms like LinkedIn to source and attract potential hires.
• Graduate programmes: Hiring directly from universities and colleges.
• Company careers page: Attracting candidates who are already interested in your brand.

This approach is about bringing new blood into the business.

Advantages of internal recruitment

Looking within your own team first can be a powerful move. It sends a clear message to your people: we believe in you, and there’s a future for you here. While we cover the advantages of internal recruitment in depth elsewhere, the key benefits are cost, speed, morale, and cultural fit. You save a fortune on recruitment fees, fill roles faster, and hire someone who already gets how your business works.

When internal recruitment works best

Internal hiring isn’t just for covering a role quickly; it’s a strategic tool. It works brilliantly in specific scenarios:

• Clear succession paths: When you’re promoting a star performer into a leadership role they’ve been working towards. This is succession planning in action.
• Building specialist knowledge: Moving an employee laterally to a new team can help spread valuable institutional knowledge across the business.
• When morale needs a boost: Promoting from within shows everyone that hard work and loyalty are rewarded, which can be a huge motivator for the entire team.
• For roles requiring deep company knowledge: Some roles are much easier to fill with someone who already understands your products, processes, and people.

Advantages of external recruitment

While hiring internally is great for stability, external recruitment is your engine for growth and innovation. Bringing in someone from the outside injects new skills, fresh perspectives, and diverse experiences into your team. This is how you avoid groupthink and stay ahead of the curve. External hires can challenge the status quo and introduce new ways of working that your current team might never have considered. It’s a vital part of effective recruitment marketing strategies.

When external recruitment works best

Sometimes, looking outside is not just an option; it’s a necessity. External recruitment is your best bet when:

• You need new skills: If you’re entering a new market or adopting new technology, you likely won’t have the required expertise in-house.
• You’re scaling rapidly: When you need to hire multiple people for a new team, you simply won’t have a large enough internal talent pool.
• You need a new leader: Bringing in a senior leader from outside can signal a major change in direction and inject new energy and authority into a team.
• You want to increase diversity: Hiring externally is one of the most effective ways to bring in people from different backgrounds, industries, and ways of thinking.

Disadvantages to consider

No strategy is perfect. Being a smart employer means understanding the potential downsides of each approach so you can plan for them. It’s about making a clear-eyed choice, not just hoping for the best.

Internal recruitment limitations

The biggest risk of only hiring internally is stagnation. You can end up recycling the same ideas and creating an echo chamber where everyone thinks the same way. This can stifle innovation and leave you with significant skill gaps that you can’t fill. It can also create tension. If one person gets a promotion, what about their colleagues who were also going for it? You risk creating resentment if the process isn’t seen as fair and transparent.

External recruitment limitations

The most obvious drawback of external recruitment is the cost. Agency fees, advertising, and the time spent interviewing all add up. It’s also a much slower process. More importantly, it’s riskier. You’re hiring someone based on a few interviews and some references. They might look perfect on paper, but you don’t truly know how they’ll perform or fit into your culture until they’re on the job. A bad hire is one of the most expensive mistakes a business can make.

How to choose the right approach for your business

The best recruitment strategy isn’t about choosing one side and sticking to it. It’s about building a flexible framework that allows you to make evidence-based decisions for each and every role. You need to think like a strategist, not just a hiring manager.

Consider role level and urgency

The right choice often depends on the job itself. For junior roles, you might look externally to bring in fresh talent you can mould. For senior leadership, an external hire can bring invaluable strategic experience. But for a mid-level specialist role, your best candidate might be an internal high-performer who’s ready for the next step. If a role is business-critical and needs to be filled urgently, an internal candidate who can start immediately is often the better choice.

Evaluate long-term talent goals

Think beyond this single hire. What does your business need to look like in two years? Five years? If your goal is to build a culture of loyalty and develop leaders from within, you should prioritise internal promotions. If your goal is rapid expansion into new markets, you’ll need a robust external hiring machine. Align your recruitment decisions with your broader business strategy and succession plans.

Balance cost, speed and culture

Ultimately, it’s a game of trade-offs. You need to decide what matters most for this specific role. Create a simple decision matrix for your hiring team:

• Need it fast and cheap? Lean internal.
• Need fresh ideas and new skills? Lean external.
• Is cultural fit non-negotiable? Lean internal.
• Need to shake things up? Lean external.

This helps you evaluate the trade-offs logically and consistently.

Combining internal and external recruitment strategies

The smartest companies don’t see this as an “either/or” choice. They build a hybrid approach that gives them the best of both worlds. This means creating a resilient talent pipeline where you are always developing your internal people while simultaneously building a brand that attracts top external candidates.

Consider a policy where all roles are advertised internally for a week before going to the external market. This gives your people the first shot but doesn’t stop you from looking outside if there isn’t a suitable internal fit. Using modern hiring and recruitment software allows you to manage both pipelines seamlessly, giving you a complete view of all your candidates, whether they’re internal or external. It’s all part of building a culture of ethical recruitment.

Using modern hiring and recruitment software allows you to manage both pipelines seamlessly, giving you a complete view of all your candidates, whether they’re internal or external. With Employment Hero’s SmartMatch, you can instantly surface high-quality candidates who match your role requirements using real-time labour market data. It helps you cut time-to-hire, expand your talent pool, and make more informed decisions from the very start of the recruitment process.

Strengthening your recruitment approach with Employment Hero

There’s no single right answer in the debate of internal vs external recruitment. The right choice depends entirely on the role, your business goals, and your company culture. By understanding the pros and cons of both, you can move beyond guesswork and start making strategic decisions that build a stronger, more capable, and more resilient team.

Thinking deeply about your internal recruitment strategies is just as important as knowing the advantages of internal recruitment. A balanced approach is almost always the winning one.

Explore how Employment Hero’s all-in-one platform can help you simplify your entire recruitment process, manage talent, and build the high-performance team you need to succeed.

When you’ve got a vacancy, the pressure is on. You need the right person and you need them yesterday. The big question is, where do you find them? Do you look to the talent you’ve already nurtured within your own walls or do you cast your net wider? This is the central puzzle of internal vs. external recruitment and getting it right can be a game-changer for your business.

Promoting from within can feel like the perfect solution—it’s faster, cheaper and a huge morale booster. But it’s not always the best move. Sometimes, you need a fresh perspective to shake things up and drive real growth.

This guide cuts through the noise. We’ll give you a straight-talking look at the advantages and disadvantages of internal recruitment, helping you make a strategic choice that aligns with your business goals, not just a quick fix to fill a seat.

What is internal recruitment?

Internal recruitment is the practice of filling an open position with an existing employee from your own company. Instead of looking outwards, you look inwards. It’s about promoting, transferring or developing the talent you already have.

This approach is more than just filling a gap; it’s a core part of building a strong company culture and a clear path for career progression. We explore a range of powerful internal recruitment strategies in another guide, but the core idea is simple: you’re betting on your own people.

Understanding the pros and cons is the first step toward building a recruitment process that truly serves your business.

The key advantages of internal recruitment

Leaning on your internal talent pool can deliver some serious wins. It’s a strategy that rewards loyalty, builds culture and can have a direct, positive impact on your bottom line. Let’s break down the major benefits.

Reduced recruitment costs and faster hiring

Let’s talk numbers. External hiring is expensive. When you add up the costs of advertising on job boards, potential agency fees (which can be a hefty percentage of the first year’s salary) and the man-hours spent screening and interviewing, the bill gets big, fast. Internal recruitment slashes these costs. Your candidate pool is smaller, you already know the contenders and the entire process is streamlined.

This speed is a massive competitive advantage. A shorter time-to-hire means less productivity lost from an empty seat. You can move a known high-performer into a role and have them adding value almost immediately, bypassing the lengthy search and screening process.

Improved employee morale and engagement

When your team sees a clear path for growth within the company, it’s a powerful motivator. Promoting from within sends a crystal-clear message: we invest in our people and your hard work will be rewarded. This isn’t just a nice-to-have; it’s a strategic tool for retention.

Employees who see opportunities for advancement are more engaged, more productive and more likely to stick around for the long haul. It transforms a job into a career. This creates a positive feedback loop—your best people stay, develop and become the future leaders of your business, which in turn attracts more ambitious talent.

Stronger cultural alignment and organisational fit

Every company has its own unique way of doing things—its own rhythm, communication style and unwritten rules. An external hire, no matter how skilled, has to learn all of this from scratch. This can be a bumpy process and a culture mismatch is one of the top reasons new hires don’t work out.

An internal candidate already gets it. They live and breathe your company culture every day. They know the people, the processes and the mission. This means they can integrate into their new role seamlessly, with a much shorter onboarding period and a far lower risk of clashing with the team. They can hit the ground running because they already know the track.

Better retention and succession planning

Internal recruitment is the engine of succession planning. By identifying and developing high-potential employees, you’re not just filling today’s vacancy; you’re building your leadership pipeline for tomorrow. It shows you’re thinking about your team’s future, not just your immediate needs.

This long-term approach fosters incredible loyalty. When employees feel that you are invested in their career development, they are far more likely to commit to your company. This reduces costly employee turnover and ensures that critical business knowledge stays within your organisation. Using talent management tools can help you track performance and identify the next generation of leaders, making this process even more effective.

The disadvantages of internal recruitment

While hiring from within has clear upsides, it’s not a silver bullet. Relying exclusively on internal talent can lead to stagnation, create friction within your teams and leave you with critical skill gaps. Acknowledging these drawbacks is key to making a balanced decision.

Limited talent pool and innovation

Your biggest asset can also be your biggest limitation. When you only recruit internally, you are fishing from a much smaller pond. You might have great people, but do you have the best person for the role available right now? The perfect candidate might be out there and by only looking inwards, you’ll never find them.

This can lead to “groupthink”—a dangerous state where everyone thinks alike and new ideas dry up. An external hire can bring a fresh perspective, challenge the status quo and introduce new skills and processes that your current team hasn’t been exposed to. Without that external influence, you risk becoming stale.

Potential internal resentment or competition

When one person gets the promotion, what happens to the colleagues who also applied and didn’t get it? Managing this process delicately is crucial. If it’s not handled with transparency and clear communication, it can breed resentment and damage team dynamics.

Unsuccessful candidates may feel overlooked or undervalued, which can lead to disengagement or even cause them to look for opportunities elsewhere. You might solve one vacancy only to create another. It’s vital to have a fair, well-defined process and to provide constructive feedback to those who weren’t selected. This is a core part of practicing ethical recruitment.

Skills and diversity gaps

If your team already lacks certain skills or diversity, only hiring internally will just reinforce the problem. You can’t introduce new skills into the team if you’re only promoting from the existing skill set. If you need expertise in a new technology or market, you’ll almost certainly need to look outside.

Furthermore, a lack of diversity in thought, background and experience can limit your company’s creativity and problem-solving ability. External recruitment is one of the most effective ways to bring in people from different walks of life, enriching your culture and making your business more resilient and innovative.

Vacancy chain effect

This is a simple but often overlooked problem. When you promote someone into a new role, you’ve successfully filled one vacancy. But you’ve also created another one—the role they just left. You’ve simply shifted the problem down the ladder.

This can create a domino effect of internal moves, leaving you with a more junior, entry-level position to fill externally anyway. While this can be a great way to create multiple promotion opportunities, you need to be prepared to manage this chain reaction and have a plan for backfilling the final role in the sequence.

How to maximise the benefits of internal recruitment

The key to successful internal hiring is to be intentional. It’s not about just giving the job to the person who’s been there the longest; it’s about building a structured, fair and transparent system that genuinely identifies and promotes the best internal candidates.

Set clear promotion criteria and transparent processes

Ambiguity is the enemy of fairness. To avoid claims of favouritism and ensure you’re complying with UK employment law, you must have a formal process. Define the skills, competencies and qualifications required for the role and communicate them clearly.

Treat internal candidates with the same respect you would an external one. Conduct proper interviews, have them complete assessments if necessary and ensure the decision is based on merit, not office politics. A clear process builds trust, even for those who don’t get the role.

Communicate effectively to avoid resentment

Communication is everything. Before you even advertise the role, be clear about the process. Once a decision is made, communicate it sensitively. Take the time to speak personally with any unsuccessful internal candidates.

Provide honest, constructive feedback on why they weren’t selected and, crucially, what they can do to develop themselves for future opportunities. This turns a moment of disappointment into a constructive conversation about their career path. It shows you still value them and are invested in their growth, which can prevent them from becoming disengaged.

Use HR software to support internal mobility

Managing internal talent shouldn’t be a guessing game based on who you spoke to in the kitchen last week. Modern hiring software can give you a complete view of the skills, performance and career aspirations of everyone in your organisation.

With performance management and career development tools, you can identify high-potential employees, track their progress and build a living succession plan. This allows you to spot talent proactively, not just reactively when a vacancy appears. It helps you make data-driven decisions about who is ready for the next step.

Building a balanced recruitment strategy

There is no one-size-fits-all answer in the internal vs. external recruitment debate. The smartest businesses don’t choose one over the other; they build a flexible strategy that uses both. The goal is to create a powerful, resilient talent pipeline that both develops your existing team and attracts the best external candidates.

Think of it as a portfolio approach. Sometimes you need the stability and cultural fit of an internal hire. Other times you need the innovation and fresh skills of an external one. A complete recruitment process guide will always incorporate both. By understanding the advantages and disadvantages of internal recruitment, you can make an informed, strategic choice for each role, every time.

Your recruitment marketing strategies should speak to both audiences, celebrating internal career progression while showcasing your company as an exciting destination for outside talent.

Ready to take control of your entire hiring process? Explore how Employment Hero’s all-in-one platform can help you find candidates, manage your talent and build the high-performance team your business deserves.

56% of the UK private sector is made up entirely of sole traders, yet many still face significant administrative burdens when it comes to operating their business.

If you’re a sole trader, spending hours every week wrestling with your tax and finance admin is not where you want to be.

The good news is that Making Tax Digital for Income Tax lands in April, and it’s designed to combat exactly this.

That’s what we talk about in this blog, based on wisdom shared at the recent event Backing Britain’s Small Businesses: Digital Tools for Growth, as follows:

MTD is enabled by AI, automation, and e-invoicing

A reminder: Making Tax Digital for Income Tax takes effect in April 2026 and effects sole traders or landlords currently using Self Assessment and earning over £50,000.

If affected, you must submit quarterly updates via MTD-ready software, and a digital tax return on 31 January each year.

AI, automation, and e-invoicing are transforming how businesses operate. They’re no longer future concepts; they’re practical solutions that can help you to drastically reduce admin whilst remaining compliant.

And with MTD for Income tax creating new ways of working, there has never been a better time to embrace this shift.

That’s why, last week, Sage partnered with Checkatrade to host Backing Britain’s Small Businesses: Digital Tools for Growth, a Parliamentary Reception at the House of Commons. Catch up on everything you missed from the event, below.

Uniting MPs, policymakers, sole traders, accountants, bookkeepers, and business leaders, the event spotlighted the vital role of digital tools in helping businesses to grow ahead of MTD for Income Tax and beyond.

3 key takeaways for sole traders and landlords

Interested in learning more about how digital tools can support your business growth ahead of MTD for Income Tax?

Keep reading to discover three key takeaways from the day.

1. Making Tax Digital for Income Tax reduces the admin burden

For many sole traders, the admin side of running a business still takes up far too much time. Hours each week are often lost managing taxes with methods that make the process harder than it needs to be.

Research shows that around 66% of sole traders still rely on spreadsheets to manage their taxes, while another 33% use entirely manual pen and paper calculations. During the event it was clear that those shifting to digital tools were already feeling the difference.

Their experiences showed that Making Tax Digital for Income Tax doesn’t have to feel like more paperwork. The right tools can make it feel like taking real control of your finances.

“Technology has made things a lot quicker and easier for me,” said Chris Jaxson from Jaxson Plastering. “As a sole trader, I’m often working 6–7 days a week, so having the ability to do things digitally and on my phone has made it a lot easier.”

Accountant Faith Mupakaviri stressed the benefits of going digital: “The time to adopt is now, and leaning on software like Sage frees up your time to do more of what you love, more for your business, and get more of your free time back”.

2. Digital tools will reduce errors and save you hours every week

The same research mentioned earlier reports that over half of small businesses say software helps them stay organised and clear on their finances.

Embracing tools to help navigate through MTD for Income Tax comes with a host of benefits to your business, including:

• Fewer errors: Digital records and software have minimised manual data entry mistakes.
• Better record‑keeping: Business financial information is stored securely in one place and can be easily updated.
• Time savings: Automation drastically reduces repetitive admin tasks, freeing your time for more valuable work.
• Real time tax visibility: Businesses are benefiting from a real time view into their tax position throughout the year instead of waiting until year-end.
• Future‑proofing: Transitioning won’t just help you now, it prepares you for ongoing digital tax changes coming from HMRC.

Many of those impacted by MTD for Income Tax are worried that going digital might mean expensive software and a steep learning curve. The reality is the opposite.

Solutions like Sage Individual are designed for people who’d rather be doing the work they love, rather than spending hours navigating tricky software. And the beauty is, it’s completely free.

Ready to make your business MTD ready?

Discover how Sage Individual, our accounting software for self-employed sole traders, helps you get MTD-ready.

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Embracing technology now could transform what feels like a regulatory challenge into an opportunity for efficiency and growth.

The shift isn’t about replacing your human expertise; it’s about amplifying it and freeing up your time to do more of what you love.

It’s vital that we do right by our businesses in the UK, and supporting small businesses and sole traders with AI tools and digital tools is an important part of that.

Emma Grant, Head of Trade Engagement, Checkatrade

3. The future of British businesses is bright

Throughout the event one message rang clear: small businesses are the backbone of Britain.

Looking to the future, Samantha Niblett MP spoke passionately about how digital and AI tools offer an exciting opportunity to level the playing field so that small businesses “feel empowered and can focus on championing economic growth in their own areas”.

This message was echoed by the Minister responsible for Making Tax Digital, Dan Tomlinson MP, who emphasised the importance of easing admin burdens for small businesses:

“Every day we hear the challenges that you face, whether it’s managing cash flow, staying compliant or finding time to focus on economic growth. Digitalisation is the answer to many of these challenges”.

If there’s one thing this event made clear, it’s that near future for British businesses won’t be defined by legislation alone.

Final thoughts: MTD is a new era

With the right digital tools and the right backing from businesses like Sage and Checkatrade alongside the commitment of policymakers, the UK’s entrepreneurs are stepping into a new era of transformation.

2026 is already proving that digitisation is opening more possibilities for sole traders and small businesses in the UK.

Are you a sole trader preparing for MTD for Income Tax? Start MTD with Sage and connect your bank feed to be in for a chance of winning £25,000 to cover your tax bill.

Win £25,000 to cover your tax bill

Sole trader? Just follow our three simple steps to get yourself ready for MTD, and you’re in with a chance of winning!

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