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Common employment law mistakes we see in SMEs
Small employers do a hundred things right every day. The stuff that trips them up tends to be small — paper-work, timing, or an informal decision — until it becomes a live dispute. Below are the recurring, avoidable mistakes we see with SMEs in the UK, why they matter now, and practical fixes you can apply today.
1. Not giving written employment particulars (or leaving them incomplete)
What happens
Employers legally must give a written statement of employment particulars. The principal terms should be provided on day one; the wider written statement must be provided within two months of the start date. Failing to supply these particulars or to update them when terms change creates uncertainty and can widen the scope of claims.
Why it matters with 2026 changes
With new day-one rights and changes coming through 2026, inaccuracies in contract wording or failure to update qualifying periods (for parental leave, SSP rules, etc.) make it harder to defend routine decisions. A clear written statement is often the first thing a tribunal will look for.
Quick fix
- Provide the required principal terms on day one and complete the written statement within two months.
- When you change policies (SSP, parental leave, flexible-working process), update the written statement within one month of the change.
2. Getting holiday pay wrong (regular overtime, variable pay and leavers)
What happens
Holiday entitlement is statutory (5.6 weeks a year for most workers) and holiday pay must reflect a worker’s “normal pay” — including regular overtime, commission or other payments where appropriate. Common errors include using basic salary only, mishandling part-year or irregular hours workers, or miscalculating holiday on termination, which can lead to back-pay claims.
Why it matters now
Post-pandemic case law and government guidance have increased scrutiny on correct holiday pay calculations. SMEs with irregular-hours staff (seasonal, casual, gig) are particularly exposed.
Quick fix
- Review how you calculate holiday pay for staff with variable pay or regular overtime. Use gov.uk / ACAS guidance and, if necessary, the 12.07% method for eligible irregular-hours workers. Test examples for leavers.
3. Payroll and SSP (statutory sick pay) readiness
What happens
Payroll mistakes — late or incorrect SSP, failing to apply waiting-day rules correctly, or not accounting for low-paid workers — are common. From 6 April 2026, the SSP waiting days are being removed and entitlement rules are widening (removal of the lower-earnings threshold), which accelerates employer liability for short absences. Employers who haven’t tested payroll scenarios risk underpaying staff or facing compliance issues.
Why it matters now
SSP changes mean liability can start on day one for qualifying absences. Payroll systems, software providers and processes must be updated before 6 April 2026.
Quick fix
- Speak to your payroll provider or software supplier now. Test scenarios (single-day absence, linked periods, low-paid staff). Confirm whether SSP rules will be applied correctly from 6 April.
4. Treating flexible-working requests casually
What happens
Flexible-working requests are increasingly common. The mistake isn’t being flexible, it’s not applying a fair, documented process when deciding. Poorly documented refusals or inconsistent handling (different managers doing different things) are a frequent source of claims. ACAS guidance and recent changes make a proper record of the decision and the business reasons for refusal vital.
Why it matters now
As flexible working becomes more widely expected, tribunals and tribunals’ guidance are focusing on whether employers applied a fair, transparent and consistent process — not only on the outcome.
Quick fix
- Adopt a short template: request → questions to assess impact → available alternatives → written outcome and appeal route. Keep a central record. Train line managers to use the template.
5. Poorly handled probation, performance and dismissal processes
What happens
SMEs often move quickly to dismiss or extend probation without documenting the steps that led to the decision. The common errors: no evidence of prior coaching, inconsistent standards applied between employees, no clear improvement plan, or failure to follow capability or disciplinary procedures. These gaps create costly exposure.
Why it matters now
Expectations have shifted towards clearer process and record-keeping. Tribunals now tend to focus on what was recorded at the time, which can leave smaller employers relying on managers’ memory more exposed than they realise.
Quick fix
- Use short, dated notes after performance discussions (who, what, next steps). Issue a simple written improvement plan with clear, timed checkpoints. If dismissing, ensure you followed your own policy and documented alternatives considered.
6. Failing to follow redundancy consultation rules (collective and individual)
What happens
Where businesses propose 20 or more redundancies at one establishment within 90 days, collective consultation rules apply. Recently announced changes increase the maximum protective award for failing to consult from 90 days’ pay to 180 days’ pay (for dismissals on or after 6 April), making proper consultation and record-keeping more important.
Why it matters now
The increased protective award is a deliberate deterrent — failing to follow process is now more expensive for employers. SMEs need to know when collective consultation thresholds apply and who represents employees for consultation.
Quick fix
- If redundancy is possible, map the timeline, identify representative bodies (trade unions or elected reps), and document consultation meetings and minutes. Seek early legal or HR advice for larger restructure plans.
7. Not keeping managers briefed and records centralised
What happens
Many mistakes start with line managers making off-the-cuff calls and filing notes locally. That breaks the paper trail. When disputes arrive, employers struggle to reconstruct what happened. Centralised, consistent record-keeping is often missing.
Why it matters now
If a decision is questioned, the lack of timely notes often causes as many problems as the decision itself. Tribunals expect to see reasoning recorded at the time, not reconstructed after the fact.
Quick fix
- Use a single, simple place for HR notes (shared drive, HRIS, or a secured folder). Create a one-page “how to note” for managers: date, who present, what was said, decision, and next steps.
Action checklist
- Payroll check: confirm SSP processing and test day-one absence scenarios with your payroll provider.
- Contracts & written terms: ensure principal terms were given on day one and the wider written statement is filed within two months. Update any clauses referencing qualifying periods (parental rights, SSP thresholds).
- Holiday pay sample tests: pick five variable-pay employees and run holiday-pay calculations (including regular overtime/commission). Fix gaps.
- Manager briefing: run a 30-minute session on documenting decisions, flexible-working process and how to log notes. Make it practical and example-based.
- Redundancy / restructure plan: if redundancies are a possibility, map thresholds and consultation steps and document who will lead them.
Conclusion: fix the small things before they become big problems
Most employment law issues we see in SMEs don’t come from bad intent or wilful non-compliance.
They come from:
- decisions made quickly
- assumptions based on “how we’ve always done it”
- policies and payroll systems that haven’t quite kept pace with change
The good news is that many of the risks outlined above are preventable. Clear written terms, consistent processes, basic documentation, and managers who know when to pause and record their reasoning go a long way.
You don’t need to overhaul everything at once.
Start with the areas that create the most exposure, sickness pay, flexible working, probation, dismissal, and redundancy, and build from there.
If you’d like a practical walk-through of these issues, including what’s changed, what’s coming next, and what UK employers should prioritise, we are hosting a webinar: Employment Law Update 2026.
Learn more about it and register here.
The webinar is for general guidance only and does not constitute legal advice.










