The vast majority of small businesses don’t have adequate workplace policies in place, according to research published today by legal startup LawPath.

A survey of more than 500 Australian small businesses found 77% of businesses do not have established workplace policies for issues ranging from drug and alcohol use to social media.

In addition, around 40% of the businesses LawPath surveyed do not have employment contracts for part-time, full-time or casual employees.

The biggest offenders were businesses operating as a partnership, with 91% of businesses operating under this structure reporting they do not have employment contracts.

Read more: Six employment laws your business may be breaking

While 61% of the SMEs surveyed have hired contractors, 17% did not have contract agreements.

Also 63% of respondents conducted business online but just over 20% did not have website terms and conditions.

Damien Andreasen, chief executive of LawPath, told SmartCompany the number of small business owners operating without adequate workplace policies came “as a bit of a shock”.

“What this tells me is it’s difficult to understand all the obligations you have as a small-to-medium-sized business owner,” Andreasen says.

“Especially around employment contracts, you think that is something that would be fairly well known that you need some sort of agreement in place outlining how that engagement works. Similarly, with workplace policies – these are the standards a business sets.”

Andreasen says he expects the cost of drawing up professional contracts often deters small business owners from having the correct documents and policies.

“The traditional legal model has always been complex, time-consuming and very expensive for small-to-medium businesses,” he says.

“There’s always been a bit of a fear factor and them putting their head in the sand. It’s a huge cost for an early-stage company.”

However Andreasen says it is critical for SMEs to have employment contracts and workplace policies in place in case someone injures themselves at work or there is a dispute over intellectual property.

The lead-up to Christmas is also an important time to review workplace policies, according to Andreasen.

“If you don’t have your drug and alcohol policy in place, those elements could get you in trouble,” he says.