Last year tribunals dealt with 98,000 claims based on work disputes but in more than a third of those cases the individual and the manager had not discussed the problem at all before approaching an employment tribunal.

The DTI survey of 504 HR managers at small and medium-sized businesses, found that three-quarters of employers worry about the financial implications of being taken to an employment tribunal and more than two-thirds are concerned about the damage it could do to their business reputation and workplace morale.

Only 19% of businesses correctly estimated the average cost of an employment tribunal to a business – an average of £2000 in management time and legal fees.

A new employment law comes into force in October making it mandatory for all employers to have minimum dismissal, disciplinary and grievance procedures in the workplace.

The regulations will place new responsibilities on employers and employees to discuss workplace disputes when and where they happen in a bid to resolve them before going to an employment tribunal, thereby avoiding unnecessary litigation. Employees will usually be required to raise these problems with their employers before they can take a claim to an employment tribunal.

“We are introducing these new regulations to provide a framework for employers and employees to handle disputes in the workplace, ensuring that employment tribunals take their proper place as the backstop for individual employment rights rather than the first port of call,” said Employment Relations Minister Gerry Sutcliffe.

“Many businesses already have dismissal and disciplinary procedures in place, but for those that don’t, the new regulations will help ensure that they avoid unnecessary costs and stress which makes for a better workplace and higher productivity,” he said.