For a small business, a disciplinary problem rarely arrives with a policy manual attached. It arrives as a member of staff who keeps turning up late, a performance slide nobody has documented, or a single serious incident that needs a decision this week. How you handle the next few days matters more than the incident itself, because an employment tribunal will judge your procedure almost as closely as your conclusion.
The good news is that the procedure is not mysterious. The ACAS Code of Practice on Disciplinary and Grievance Procedures sets out a short, fair sequence, and tribunals are legally required to take it into account. Follow it, document each step, and even a difficult dismissal becomes defensible. Ignore it, and an otherwise fair decision can become an expensive one: a tribunal can increase compensation by up to 25 per cent where an employer has unreasonably failed to follow the Code, and can reduce it by up to 25 per cent where the employee has done so.
This guide walks through the procedure as a small employer should actually run it, with no HR department and no solicitor on retainer.
What the ACAS Code is, and what it is not
The ACAS Code is not a statute, and you cannot be sued simply for breaching it. It is a code of practice that sets out the principles of fairness tribunals expect: establish the facts, tell the employee the case against them, give them a chance to respond, decide impartially, and allow an appeal. It applies to disciplinary situations involving misconduct and poor performance. It does not apply to redundancy dismissals or to the non-renewal of a fixed-term contract, which have their own rules.
Step 0: Try the informal route first
Not every problem needs a formal procedure. For a first, minor issue, such as occasional lateness or a dip in output, a quiet, private conversation is usually faster and fairer than a written warning. Explain what you have noticed, ask what is going on, agree what needs to change and by when, and make a brief note of the conversation with the date.
The informal route only works if it is genuine. Do not use it as a disguised warning, and do not let it drift: if the problem repeats or the informal conversation does not produce change, move to the formal procedure promptly. Delay helps nobody, because the employee cannot tell whether the matter is closed, and you cannot show a tribunal a clear escalation.
Step 1: Investigate before you accuse
The most common small-business mistake is deciding the outcome before investigating. The Code requires you to establish the facts before deciding whether there is a case to answer. That means gathering the evidence, not collecting reasons to support a conclusion you have already reached.
Appoint someone to investigate who was not involved in the incident and, in a very small team, that may mean you investigate and someone else chairs the hearing, or you bring in an external adviser for the hearing stage. Interview witnesses separately, take signed and dated statements, and collect documents such as rotas, emails, CCTV stills or till records. Keep the investigation proportionate: a lateness case needs the rota and a short meeting, not a week-long inquiry.
If you need to suspend the employee during the investigation, suspend on full pay, keep it as brief as possible, review it regularly, and state in writing that suspension is a neutral act, not a punishment and not a finding of guilt. Unpaid suspension, or suspension that drags on without updates, is one of the fastest ways to turn a fair process into an unfair one.
At the end of the investigation, write a short report: the allegation, the evidence for and against, and a conclusion on whether there is a case to answer. If there is no case, write to the employee confirming that no action will be taken, and keep the report on file. If there is a case, move to step 2.
Step 2: Tell the employee the case in writing
If there is a case to answer, write to the employee setting out the allegation in enough detail for them to respond. Vague letters such as “concerns about your conduct” are not enough. Name the dates, the incidents and the rule or standard allegedly breached, and say what the possible consequences are, including dismissal where that is a real possibility.
Send the employee copies of the evidence you will rely on, including witness statements, and give them reasonable time to prepare. There is no fixed number of days in the Code, but 48 hours is a minimum for a straightforward case and a week is safer for a complex one. Include the time and place of the hearing, and tell the employee they have the statutory right to be accompanied by a fellow worker or a trade union representative. If your contract allows a wider companion, say so.
Step 3: Hold a proper hearing
Run the hearing in a private room, without interruptions. Start by explaining the allegation and the evidence, then let the employee respond in full. Ask questions, but do not cross-examine like a barrister: you are trying to understand what happened, not to win an argument. If new evidence emerges that changes the picture, adjourn and investigate it rather than pressing on. Take notes, or record the hearing with the employee’s agreement, and agree the notes afterwards where possible.
Step 4: Choose a proportionate sanction
After the hearing, decide without unreasonable delay and confirm the decision in writing, with reasons. The sanction must fit the offence, the employee’s record, and how you have treated similar cases before. Inconsistency is dangerous: dismissing one employee for lateness while giving another a verbal warning for the same pattern invites a discrimination or unfair dismissal claim.
A typical ladder for a small business looks like this. A first written warning for a first offence, kept on file for six months. A final written warning for a repeat or a more serious offence, kept for twelve months. Dismissal with notice for further misconduct or for a capability failure after warnings and support. Summary dismissal, without notice, only for gross misconduct, and only where the contract allows it.
Your decision letter should state the sanction, the reasons, how long any warning will remain live, what improvement is expected, and the right of appeal, including the deadline and who to appeal to.
Step 5: Offer a genuine appeal
Every employee who receives a sanction should be offered an appeal, and the appeal should be heard by someone more senior than, or at least different from, the person who made the original decision. In a business with only a handful of staff, that may mean the business owner hears the appeal where a manager decided the case, or an external adviser chairs it.
The worked example: repeated lateness in a five-person firm
Imagine a shop assistant who has been late twelve times in two months, by 20 to 45 minutes each time. The owner first has an informal conversation and notes it. The lateness continues. The owner checks the rota and clock-in records, meets the employee to hear their explanation, and finds no underlying reason such as a changed bus timetable or a caring responsibility that would call for an adjustment.
The owner writes to the employee setting out the twelve dates, encloses the rota extracts, and invites them to a hearing with the right to be accompanied. At the hearing the employee accepts the lateness but says the rota is unfair. The owner adjourns, checks the rota against other staff, and finds it is not unfair. The owner issues a first written warning, live for six months, with a clear standard: no more than two late arrivals in the next three months. The letter gives the right of appeal. If the pattern repeats, the same process leads to a final written warning and then, if it still does not improve, dismissal with notice.
Records, consistency and the tribunal test
Keep a complete file for every case: the investigation report, the invitation letter, the evidence pack, the hearing notes, the decision letter and the appeal outcome.
Frequently asked questions
Can I dismiss an employee with less than two years’ service without following the Code?
Employees generally need two years’ service to claim ordinary unfair dismissal, but the Code still matters: discrimination, whistleblowing and automatically unfair dismissal claims have no qualifying period, and a tribunal can still take the Code into account. Short service is not a shortcut to an unfair process.
What counts as gross misconduct?
Gross misconduct is behaviour so serious that it destroys the employment relationship: theft, fraud, violence, serious negligence, deliberate damage to property, or serious breach of health and safety rules. Your contract should list examples, but the list is a guide, not a definition, and you must still investigate and hold a hearing before summary dismissal.
The bottom line
A fair disciplinary procedure is not bureaucracy for its own sake. It protects the employee from a snap decision, it protects the business from a tribunal claim, and it usually produces a better outcome than either ignoring the problem or acting on impulse. Investigate first, put the case in writing, hear the employee out, choose a proportionate sanction and offer a real appeal. That sequence, documented at each step, is what the ACAS Code asks of every employer, whatever the size of the business.
Related reading: Employment Contract Requirements, How to Hire Your First Employee, Statutory Redundancy Pay, Statutory Sick Pay.
