The average unfair dismissal award is nearly £9,000, and discrimination claims can cost far more - but for many SMEs, an
Employment Tribunal risk feels remote. Until it isn’t.
In reality, most costly claims stem from small, avoidable mistakes in day-to-day people management so it’s far better to prevent issues arising in the first place.
Here are the five most common pitfalls we see across SMEs, along with practical tips to stay compliant and confident in 2026.
1️⃣ Poor Record-Keeping
The pitfall:
Missing contracts, unsigned policies, verbal warnings with no written note, patchy attendance records, outdated documents - these can undermine even the fairest management decisions.
Why it matters:
In tribunal, documentation often becomes the deciding factor. If you can’t evidence your process, the assumption may be that it didn’t happen.
Safe alternative:
- Ensure contracts and staff handbooks are legally compliant, and reflect current law
- Issue contracts before employment starts
- Store all documents in one system (WorkSmarter’s employee records are ideal)
- Keep clear notes from informal chats, investigations, and disciplinary meetings
- Log absences and timekeeping consistently
Myth: “We’re a small business and trust each other - informal is fine.”
Reality: Informal decisions, without proof, create legal vulnerability.
2️⃣ Not Following a Proper Investigation
The pitfall:
Jumping straight to disciplinary action without fully exploring the facts. Common in SMEs when time is short or situations feel “obvious”.
Why it matters:
Even when misconduct is clear, skipping an investigation can make a dismissal procedurally unfair - leading to costly awards.
Safe alternative:
- Appoint an impartial investigator
- Collect statements from all relevant parties
- Review evidence objectively
- Keep investigation and disciplinary roles separate where possible
- When dealing with disciplinary issues, redundancies, or grievances, follow the ACAS Code of Practice. Failure to do so can increase tribunal awards by up to 25%.
Myth: “If an employee admits wrongdoing, we can proceed straight to a warning/dismissal.”
Reality: Every disciplinary outcome still requires a fair and documented process.
3️⃣ Inconsistent Treatment of Staff
The pitfall:
Managers handling similar issues differently - for example, giving one employee a warning for lateness but overlooking another’s.
Why it matters:
Inconsistency is a common basis for discrimination or unfair treatment claims, even if no discrimination was intended.
Safe alternative:
- Apply policies consistently across all teams
- Train managers on fair decision-making
- Use your HR system to ensure the same steps are followed each time
- Document the reasoning for any deviation
Myth to bust: “It’s fine to treat people differently if we have good intentions.”
Reality: Intent doesn’t matter - consistency does.
4️⃣ Not Making Reasonable Adjustments
The pitfall:
Failing to support employees with disabilities or long-term health conditions, either through lack of awareness or fear of ‘doing the wrong thing’.
Why it matters:
Disability discrimination has no cap on compensation if the claim is successful. Many cases begin with unintentional mistakes - for example, ignoring medical advice or refusing flexible working without proper consideration.
Safe alternative:
- Ask employees what adjustments they feel would help
- Consider occupational health assessments
- Explore flexible hours, modified duties, phased returns
- Review regularly - adjustments may evolve
Myth to bust: “Adjustments must be expensive or disruptive.”
Reality: Most adjustments are simple, low-cost, and improve staff retention.
5️⃣ Incomplete Onboarding Leading to Later Disputes
The pitfall:
Unclear roles, missing training, no probation review, or failure to issue policies early on.
Why it matters:
Poor onboarding often leads to performance issues, misunderstandings, and grievances - all of which become harder to manage safely after the employee has been in post for several months.
Safe alternative:
- Issue all documents before day one
- Set expectations clearly: duties, standards, timelines
- Hold structured probation reviews with documented outcomes
- Provide required training (Health & Safety, role-specific, compliance)
- Use automated onboarding workflows to avoid missed steps
Myth to bust: “Probation means we can dismiss easily if it doesn’t work out.”
Reality: Dismissals - even in probation - must still follow a fair, evidence-based process.
✅ Your 2026 HR Risk-Reduction Checklist
Use this quick-reference checklist internally:
✔ Maintain complete, accessible employee records
✔ Always investigate before you discipline
✔ Apply policies consistently across all staff
✔ Consider reasonable adjustments proactively
✔ Strengthen onboarding and probation processes
Doing these well not only reduces legal risk but also improves culture, retention, and performance.
How WorkSmarter Can Help
Our platform supports SMEs by:
- Storing all employee documents securely
- Automating onboarding workflows
- Tracking training and safety roles
- Documenting absence, performance, and disciplinary processes
- Providing clear audit trails in case of disputes
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