The most common reasons small businesses end up at an employment tribunal

Employment tribunals are slow, stressful and expensive, and the costs are rarely recovered even if you win. The good news for small businesses is that most claims come from a short list of avoidable mistakes. Here are the ones we see most often, and how to stay clear of them.

1. A dismissal handled badly

By far the most common trigger. A rushed disciplinary, no proper investigation, no fair hearing, or no right of appeal can make a dismissal unfair even when the reason was genuine. Follow the ACAS Code, document each step, and never dismiss in the heat of the moment.

2. Discrimination, often unintentional

Claims linked to the protected characteristics under the Equality Act, such as age, sex, disability, race, religion, pregnancy and maternity, are among the most costly because compensation is uncapped. Most small-business discrimination claims are not malicious; they come from inconsistent decisions, careless comments, or failing to consider reasonable adjustments. Consistency and good training are the best defence.

3. Unpaid wages, holiday pay and unlawful deductions

Getting holiday pay wrong for part-time, casual or term-time staff, making deductions without written agreement, or final-pay disputes on exit are common and easy to avoid with clear contracts and a correct method for calculating pay.

4. Constructive dismissal from poor handling

When an employee resigns and claims they were forced out by how they were treated, a serious grievance ignored, a sudden change to terms, or a breakdown in trust. Take grievances seriously, do not change terms unilaterally, and deal with issues early.

5. No written contract or statement of terms

Every employee and worker is entitled to a written statement of their main terms. Missing or out-of-date contracts leave you exposed and make every other dispute harder to defend. It is the cheapest risk on this list to fix.

6. A redundancy that was not done properly

Redundancy has to be genuine, with fair selection and proper consultation. Using redundancy to remove someone you simply want gone, or skipping consultation, is a frequent and expensive mistake.

The common thread: the basics

Almost every one of these is prevented by the same things: compliant contracts, a current handbook, fair and consistent processes, and taking advice before you act rather than after. With the Employment Rights Act 2025 strengthening protections earlier in employment, the margin for error is smaller than it used to be. Getting the foundations right is far cheaper than defending a claim.

This is general information, not legal advice. For your specific situation, take advice before you act.