A formal grievance is not a HR problem. It is a legal process with clear duties, specific timescales, and consequences for not following the rules that can run to tens of thousands of pounds.

Many UK SME employers know they should have a grievance procedure; however, fewer have one they have actually followed, and fewer still could describe the five steps the ACAS Code of Practice requires them to take. This article covers all of them.

What makes something a formal grievance, and why the distinction matters

Not every complaint is a formal grievance. An employee who tells their manager they are unhappy with their workload is raising a concern. An employee who puts a complaint in writing and describes it as a formal grievance is triggering a legal process, whether you acknowledge it or not.

The difference matters because the moment a formal grievance is raised, the ACAS Code of Practice on Disciplinary and Grievance Procedures applies. This is a code backed by law. Employment tribunals must take it into account when deciding whether an employer acted fairly. If you fail to follow it and an employee wins a claim connected to that grievance, the tribunal can increase any compensation by up to 25 per cent.

For an unfair dismissal award of £10,000, that is an extra £2,500 for a process failure. For larger awards, the numbers get worse.

The other reason the distinction matters is constructive dismissal. If an employee resigns and argues they were forced out by unbearable working conditions, how you handled or mishandled their formal grievance will sit at the centre of the case. A grievance left unanswered is one of the clearest pieces of evidence the employee’s solicitor can put in front of a tribunal.

What the ACAS Code of Practice requires you to do?

The ACAS Code sets out five steps every employer must take when handling a formal grievance. These are not suggestions. They are the legal standard you will be judged against if this reaches a tribunal.

Step one: acknowledge the grievance in writing, promptly. ACAS guidance indicates this should happen within a few working days of receiving it. Ignoring a formal grievance, or sitting on it while you decide what to do, is itself a breach of the Code.

Step two: carry out a reasonable investigation. This means gathering the relevant facts: speaking to witnesses, reviewing documentation, and understanding the timeline. It does not mean accepting the employee’s account without question, but it also does not mean dismissing the complaint without looking into it. The investigation must be real, not just for show.

Step three: hold a grievance hearing. The employee must be given advance notice and a reasonable opportunity to prepare their case. The hearing is not a formality. It is the point at which the employee can set out their position fully before you reach any conclusions.

Step four: allow the right to be accompanied. Under the Employment Relations Act 1999, employees have a legal right to bring a companion to a formal grievance hearing: a colleague or a trade union representative. Refusing this right is its own breach of the law, regardless of how well you handle everything else.

Step five: communicate the decision in writing and offer the right of appeal. The outcome letter must explain what was found, what decision was reached, and the reasons for it. Offering a right of appeal is not optional. Employers who skip this step have broken the Code before the employee has even decided whether to take things further.

The mistakes that turn a formal grievance into a tribunal claim

Most employers who find themselves defending tribunal claims have not done something seriously wrong. They have made a series of careless decisions, usually under time pressure, without proper guidance.

The most common mistake is delay. There is no statutory deadline for completing a formal grievance procedure, but unreasonable delay creates two problems. It signals bad faith to a tribunal. And it gives the employee time to resign, citing the unresolved grievance as the reason for their departure. A constructive dismissal claim built on a mishandled grievance means you are defending not just the process failure but the actual complaint behind it as well.

The second most common mistake is a biased investigation. This typically happens when the person investigating is too close to the subject of the complaint. The employee is complaining about their line manager; the line manager’s manager conducts the investigation. The conflict of interest is obvious to a tribunal, even if it was invisible at the time. Where no genuinely independent person exists internally to investigate, the right answer is external HR support.

The third mistake is mixing up a grievance with a disciplinary. An employee who raises a formal grievance while their own disciplinary process is underway is exercising a legal right. You cannot treat the grievance as a delaying tactic or dismiss it because the timing is inconvenient. The two processes must be handled carefully. Usually, the grievance is dealt with first, or both run at the same time with clear separation between them.

The fourth mistake is the outcome letter that explains nothing. “We have investigated your grievance and found no evidence to support your claims.” Without reasoning, that is not a decision. It is a dismissal. Tribunals want to see the thinking behind your decision, not just the outcome. If you upheld the grievance, explain what you found and what you are doing about it. If you did not uphold it, explain why, with reference to the evidence you considered.

What does your paper trail need to look like?

A formal grievance procedure is only as strong as the paper behind it. If a claim reaches a tribunal twelve months later, you will need to produce records of every step: the date you acknowledged the grievance, the investigation notes, the invitation to the hearing, the hearing notes themselves, the outcome letter, and the appeal outcome if there was one.

If those documents do not exist, the tribunal will draw its own conclusions about whether the procedure was followed at all. In practice, an absence of documentation is treated as an absence of process.

Investigation notes matter. They should record who was spoken to, on what date, what was said, and what written evidence was reviewed. They do not need to be formal word-for-word records, but they must be written at the time, not pieced together months later when a solicitor’s letter arrives.

Hearing notes should be taken by someone who is not running the hearing. Two people in the room: one asking the questions, one writing down the answers. That separation matters. In a small business where one person is effectively doing everything, this is one of the clearest signals that external support for formal grievance procedures is not a luxury.

What does getting it wrong cost in 2026?

The Employment Rights Act 2025 has raised the legal standards for UK employers. Grievance policies that have not been reviewed since 2022 or 2023 are carrying a risk that has not yet surfaced. The obligations have not fundamentally changed, but the scrutiny has increased, and the awards available to claimants are higher.

Defending a tribunal claim costs between £8,000 and £15,000 in legal fees alone, whether you win or lose. If you lose on the actual complaint and the tribunal finds you also broke the ACAS Code, the 25 per cent increase applies on top of the award. Where an employee has resigned to bring a constructive dismissal claim, the potential award includes the notice period, an unfair dismissal element and, where discrimination is also alleged, an unlimited injury to feelings payment.

Most SME employers are not careless or at fault when this happens. They are unprepared. They have a grievance policy because someone told them they needed one. They have never actually used it. When a real formal grievance arrives, they are reading the policy at the same time as they are trying to manage the situation. That is precisely where the errors happen.

Common questions from employers facing a formal grievance procedure

Does following the ACAS Code guarantee I am legally protected?

No. The Code sets the minimum standard. Following the procedure correctly significantly reduces your exposure, but the quality of your investigation, the fairness of your hearing, and the reasoning in your outcome letter all matter independently. A process that follows the right steps but reaches an unfair outcome can still result in a tribunal finding against you.

What if the grievance is about me, as the business owner or MD?

This is common in SMEs, and it is one of the most difficult positions to be in. You cannot investigate a grievance raised against you. If there is no other senior person who can manage the process neutrally, you need external HR support or an independent investigator. Attempting to handle a formal grievance raised against yourself is one of the most reliable ways to end up with a finding of an unfair process.

Can an employee raise a formal grievance about something that happened months ago?

Yes. There is no statutory time limit on raising a formal grievance. Delay can be a relevant factor in how you assess the seriousness of the complaint, but it does not remove your obligation to follow the full procedure.

What if I think the grievance is made just to cause trouble?

You still have to follow the procedure. If, after a thorough investigation and a fair hearing, you conclude the grievance has no merit, you document that conclusion carefully and explain the reasoning. You do not skip the formal complaint process because you have already made up your mind. Tribunals take a dim view of employers who decide the outcome before the investigation is complete.

What if the employee raises a formal grievance and then goes off sick?

Acknowledge the grievance promptly as normal. Whether to proceed with the hearing in the employee’s absence, pause and wait, or seek a medical update will depend on the specific circumstances. Taking no action and hoping the situation resolves is not a safe approach. If you are uncertain how to proceed, take advice before acting.

If your grievance procedure isn’t one you would be confident defending in a tribunal, it needs work

The HR Doctor works with UK SMEs to review and rebuild employment documentation, including formal grievance procedures, so that when a grievance arrives, the process protects the business rather than exposing it. If your policies have not been reviewed since before the Employment Rights Act 2025, or if you are currently handling a formal grievance without a clear process to follow, the risk is live now.

Book a free 30-minute discovery call, and we’ll tell you exactly where your risk sits.