The hidden cost of being reasonable

Why being reasonable feels right but quietly creates risk

Being reasonable usually shows up in moments where leadership judgement matters most. A valued employee is going through a difficult period. A manager wants to do the right thing. The business is under pressure and formality feels unnecessary or even counterproductive.

In practice, being reasonable in an SME often means making an exception rather than following policy, allowing flexibility without paperwork, or prioritising the relationship over the process. In the moment, this often feels like good leadership and in many cases it is.

The risk does not sit in the decision itself. It sits in what happens next. These decisions are rarely framed as exceptions. They are left open ended, undocumented and unreviewed. Over time, being reasonable stops looking like discretion and starts looking like a new normal.

Employment tribunals do not assess whether a decision was kind. They assess whether it created expectation and whether that expectation was later broken.

How being reasonable turns into implied terms without anyone noticing

Most SMEs never set out to change employment contracts. Yet many do so accidentally through custom and practice.

An implied contractual term can arise where a way of working becomes regular, consistent, known to both parties and relied upon by employees. Once those conditions exist, the absence of a written agreement offers very little protection.

In Quinn v Calder Industrial Materials Ltd, the Employment Appeal Tribunal confirmed that a long standing and consistently applied practice can become contractually binding, even where it was never formally agreed or written down.

Typical SME scenarios include informal homeworking arrangements that are never reviewed, temporary reduced hours that quietly become permanent, adjusted duties following illness or stress that are left in place indefinitely, or flexible start and finish times that are applied without limits.

The issue is not flexibility itself. The issue is flexibility that operates without clarity, boundaries or review.

Where tribunals draw the line between kindness and contract change

Employment tribunals are not hostile to employers who act compassionately. What they are sceptical of is ambiguity.

When disputes arise, tribunals look closely at whether an arrangement was described as discretionary or temporary, whether there was any review point, whether the employer retained the right to change it, and whether similar requests were handled consistently across the organisation.

In Albion Automotive Ltd v Walker, the Employment Appeal Tribunal confirmed that a practice may become contractual if it is reasonable, notorious and certain. In practical terms, if everyone knows about it, relies on it and expects it to continue, it may bind the employer.

This is where SMEs often fall into difficulty. Decisions are made in good faith, but nothing is documented, no boundaries are set and silence is mistaken for shared understanding. Legally, silence can amount to acceptance.

Why SMEs are more exposed to the risks of being reasonable

This issue disproportionately affects SMEs, not because they are careless, but because of how they operate.

Informality is often embedded in the culture. Owner managed businesses rely on trust, speed and pragmatism. Decisions are made through conversation rather than process. That agility is a strength until it becomes difficult to explain why one employee was treated differently from another.

Managers also tend to carry disproportionate authority. Line managers in SMEs often have wide discretion and limited oversight. A single well intentioned promise can carry contractual weight later.

Finally, evidence is harder to produce. Without documentation, SMEs can struggle to demonstrate context, rationale or limits when decisions are challenged months or even years later.

Large organisations are buffered by structure and process. SMEs rely on judgement. Judgement without structure is where risk quietly builds.

How to stay human and defensible while being reasonable

The solution is not to stop being reasonable. Doing so would undermine trust, culture and the very qualities that often make SMEs successful employers. The issue is not reasonableness itself, but the absence of structure around it.

Being reasonable works best when it is treated as a managed decision, not an instinctive reaction. That requires leaders and managers to pause briefly and consider not just the immediate situation, but how the decision may be viewed in six months or a year’s time, particularly if circumstances change.

In practice, this means being explicit at the point a decision is made. If an arrangement is intended to be temporary, that needs to be said. If it is discretionary, that needs to be clear. If it is being agreed because of specific circumstances, those circumstances should be recorded. This does not require lengthy paperwork. A short follow up email confirming what has been agreed, why, and when it will be reviewed is often enough to protect both sides.

Review points are particularly important. Many of the problems that arise from being reasonable stem from arrangements that were never meant to last indefinitely but were allowed to drift. Building in a review date keeps control with the business and avoids the perception that silence equals permanence.

Managers also need clarity about when a decision is theirs to make and when it should be escalated. Not every request carries risk, but some do. Flexible working, long term adjustments, role changes and anything that could affect others in the team should rarely be agreed in isolation. Reasonableness supported by guidance is far more defensible than reasonableness based on individual judgement alone.

Finally, flexibility should be linked to business rationale, not personal favour. Decisions that can be explained objectively are far easier to defend than those that appear to rest on goodwill or personal relationships, however genuine those relationships may be.

What good looks like in practice

Defensible reasonableness is not about removing discretion. It is about shaping it.

At its best, it has three defining characteristics.

First, clarity. Employees understand exactly what has been agreed, why it has been agreed and for how long. There is no ambiguity about whether an arrangement is permanent or temporary, discretionary or contractual. That clarity protects trust by removing misunderstanding rather than creating it.

Second, consistency. This does not mean every employee is treated the same. It means that differences in treatment can be explained objectively. Where one person receives flexibility and another does not, there is a clear and defensible reason that can be articulated without embarrassment or contradiction.

Third, control. The business retains the ability to review, adjust or withdraw arrangements fairly as circumstances change. Control does not mean rigidity. It means retaining the right to manage the organisation responsibly without being constrained by unintended precedent.

When these three elements are in place, being reasonable becomes a strength rather than a liability. Trust is preserved, managers retain authority, and the business remains agile without exposing itself to unnecessary legal or cultural risk.

This is the balance SMEs need to strike. Not less humanity, but better governed humanity.