Businesses could be forced to pay fines of up to 50 per cent of costs when defeated in employment tribunals, under the terms of a proposal included in government guidelines published last week.

The Daily Telegraph reports that an upper limit of £5,000 may be set – reduced by half for companies which pay up within three weeks – but lobbying groups have expressed alarm at the suggestion, claiming it undermines the government’s “pro-business” credentials.

“It is astonishing for the government to say ‘we’re doing this to help employers’ but then introduce a fine,” said Tim Gray of legal firm Clough & Willis. “This is a tax on businesses that make mistakes.”

The British Chambers of Commerce said the proposal had come “out of the blue” and EEF policy director Steve Radley warned the coalition against imposing extra punitive measures at a time when firms are struggling in the wake of the economic downturn.

Trade unions also criticised the report, with Unite describing it as a “charter for bad bosses” and claiming the changes would simply encourage bosses to sack staff indiscriminately.

Posted by Hayley Edwards