How to handle sexual harassment in small businesses
Small business owners need to understand how to deal with sexual harassment in the workplace to avoid legal trouble and keep operations running smoothly. The UK law treats all businesses the same, regardless of size, under the Equality Act 2010. This means a single complaint can expose a company to significant financial risk, often amounting to tens of thousands of pounds in compensation.
The new legal setting
Extra protections are coming into force for staff members. Under the Employment Rights Act 2025, sexual harassment will be classified as a “qualifying disclosure” from April 6, 2026. This change means that employees reporting harassment cannot be unfairly dismissed or punished for speaking up. By October 30, 2026, the standard for employers will shift from taking “reasonable steps” to taking “all reasonable steps” to prevent harassment. The liability for third-party harassment, such as from customers or clients, will also increase unless the business has taken preventative measures.
HR consultant Laura Ranaghan notes that the process for handling these issues remains consistent across company sizes. Even a small operation must follow a structured approach similar to what large corporations use, though they may lack the dedicated HR departments to execute it.
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Defining the behavior
Situations vary widely, making it difficult to create a strict list of banned actions. Sexual harassment is defined as unwanted behavior that intimidates, offends, or causes someone to feel violated. It is not always physical contact; it can include lewd jokes, circulating inappropriate images in group chats, or persistent unwanted advances after work. A manager who thinks a flirtatious comment is “just banter” might be creating a hostile environment for a female employee, even if no offense was intended.
The law focuses on the impact of the behavior rather than the intent behind it. If a colleague claims they did not realize their actions were offensive, the business must still address the complaint based on how the victim feels.
Prevention and policies
Employment law partner Emma Gross advises a proactive approach rather than reacting to incidents. Business owners should conduct a workplace risk assessment to identify high-risk areas. This includes evaluating scenarios like lone working, work social events involving alcohol, and situations with power imbalances.
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Updating anti-harassment policies is a critical step. The documentation should clearly outline reporting procedures and reflect the upcoming changes in whistleblowing law. Gross emphasizes that a policy sitting unread in an employee handbook is insufficient. Businesses must demonstrate they have practical measures in place and create a culture where staff feel safe raising concerns.
For small businesses, the practical reality of implementing these measures often means relying on shared resources. HR Solutions knowledge manager Karen Falconer suggests that business owners look to established guidance from bodies like ACAS for standard documentation and procedures. This external framework can help smaller operations maintain a legally sound process without needing a full-time HR team.
Handling a complaint
If a staff member reports an issue, the owner must take immediate action. The first step is to establish if the employee wants to handle the matter informally or formally. Regardless of the preference, a formal investigation is usually necessary.
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It is vital to treat every complaint seriously, no matter how minor it seems. The business should have a private conversation with the complainant and take contemporaneous notes of the discussion. Falconer advises that the employee should be informed of the proposed approach and the timescale for resolution before proceeding.
The business must also hear the accused person’s version of events. A meeting should be arranged as soon as possible, ideally on the same day, to discuss the allegations. In cases involving potential gross misconduct, placing the accused on immediate suspension may be required. Even if the accused claims the incident was a misunderstanding, the investigation must determine if the behavior crossed the line.
Seniority or business importance does not exempt an employee from the investigation process. Ignoring a complaint to protect a key worker exposes the business to claims of vicarious liability, which can lead to unlimited financial penalties. If the issue cannot be resolved informally, the business must follow its formal grievance policy. This typically involves a formal meeting with both parties, often with a trade union representative or colleague present. The final decision can be appealed internally, but the outcome is binding. If the employee remains unhappy after exhausting internal options, they may seek early conciliation through Acas or file an employment tribunal claim.
