That sounds like the real problem was the lack of an employee handbook. They're not strictly required by law, but 30 employees is well above the level where you should really expect to have one in place.

The "just wing it and hope no-one takes the piss" approach is fine if you've only got a handful of employees, but is increasingly risky beyond that - it was probably only a matter of time before that organisation got into a difficult HR situation one way or another.

It's not even going to have been much of a time-saving, since all the legally-mandated bits (eg. equal opportunities, grievance procedures, anti-harassment, modern slavery, and consultation process) will still have been needed at that size, just without a central place to track and manage it all.

Poor performers get put on PIPs, right? Did that person's poor performance "ruin it for everyone" and put the rest of the working plebs (the entire company or department or whatever) on PIPs? No, of course not. The poor performer gets singled out, which is just fine.

So instead of punishing everyone for some lying asshole's poor judgment, I propose management puts that lazy jerk on their own SDIP (sick day improvement plan).

EDIT: As an alternative, sure, update the handbook's sick policy while that liar is working for you. Since there's now precedent for handbook updating, should be an easy thing to revert it back to the normal, "no sick day policy" after they leave (by whatever means).

You're in America, right? At–will employment? The manager could have simply terminated that employee, citing no reason?