Seton HR Solutions

The hidden cost of workplace conflict for SMEs

Why unresolved conflict drains finances, damages brand reputation, and threatens organisational stability.

I hear it regularly, workplace conflict is often dismissed as a “people issue,” but the evidence tells a different story. For small and medium‑sized organisations, conflict is not uncommon, it is costly, disruptive, and can be increasingly visible to customers.

ACAS 2025 conflict prevalence report reveals that 44% of working‑age adults experienced conflict at work in the past 12 months, the highest level ever recorded in Great Britain. Conflict is even more common in SMEs, where prevalence rises to 46%. 

CIPD research reinforces this, consistently highlighting the financial burden of conflict, the impact on wellbeing, and the importance of early, skilled intervention.

The Financial Impact: What conflict really costs SMEs

1. Lost productivity and manager time

Conflict drains time and focus.

57% of people experiencing conflict reported stress, anxiety, or depression, and 49% reported a drop in motivation or commitment. These factors directly reduce productivity. 

Managers also lose valuable time with 55% spent up to a week dealing with conflict.

For SMEs, where managers often juggle multiple roles, this potential loss of capacity has a disproportionate operational impact.

2. Sickness absence and turnover

Conflict is a major driver of absence.

10% of people experiencing conflict took sickness absence, and 10% resigned as a direct result. 

Replacing an employee can cost between six and nine months’ salary, once recruitment, onboarding, and lost productivity are factored in.

For SMEs, losing even one experienced employee can destabilise a team or function.

3. Escalation to formal procedures

Formal grievances, disciplinaries, and capability processes are significantly more expensive in time, money, and wellbeing. 

Formal processes often require:

• HR or external Mediator time
• Legal advice
• Management hours
• Risk of tribunal escalation

Even when cases do not reach tribunal, the internal costs can be substantial.

The reputational impact: How conflict damages brand image

1. Employer brand and recruitment

We understand that organisational culture and conflict management strongly influence employer reputation.

Unresolved conflict leads to negative reviews, poor word of mouth, and difficulty attracting talent, especially in smaller communities across Scotland.

2. Customer experience and public perception

SMEs may be more likely than large organisations to experience conflict with customers or clients. 

When internal conflict spills into customer facing behaviour, the brand suffers.

This can lead to:

• Service inconsistency
• Complaints
• Loss of repeat business
• Damage to community reputation

For SMEs, whose brand identity is often built on trust and personal relationships, this impact can be long lasting.

Why does early, skilled intervention matter?

Early intervention into seeking resolution is the most effective approach and prevents escalation, reduces costs, and protects employee wellbeing.

A qualified mediator provides:

• Impartiality and psychological safety
• Structured, confidential conversations
• Techniques to rebuild trust
• Faster, more sustainable resolutions
• Reduced reliance on formal procedures

For SMEs, mediation is not a luxury, it is a strategic investment.

Seton HR Solutions helps organisations to:

• Resolve conflict early through independent mediation
• Train managers in conflict competence
• Strengthen policies and culture to prevent recurrence
• Reduce the financial and emotional cost of disputes
• Protect employer brand and team cohesion

With conflict at record levels and SMEs disproportionately affected, now is the time to invest in healthier, more resilient workplace relationships.