Changes to the Employment Act 2008, which came into effect in April, now mean the statutory dispute resolution procedure is no longer in place and tribunals could cost firms up to 25 per cent more.

Phil Brown, managing director of YouManage, an online human resources tool, says the change now means a tribunal can increase payouts if an employer has ‘unreasonably’ not followed the code.

He adds that the move could become ‘very expensive indeed’ for small businesses in sex or race discrimination cases, as payouts are unlimited.

Mr Brown states that, particularly in a recession, no business wants to incur these kind of costs simply because owners are not aware of the law.

Companies should ensure they are fully aware of the new guidelines on how disputes should be handled to avoid these extra charges, he adds.

The number of claims heard by employment tribunals rose to almost 190,000 in 2008, with cases regarding equal pay also rising.