Employers concerned about the implications to their finances and reputation of being taken to an employment tribunal are actually doing very little to prevent potential legal claims, the Department of Trade and Industry (DTI) has warned.

Last year, tribunals dealt with 98,000 claims based on work disputes, ranging from problems over pay and conditions to racial and sexual harassment.

But research by the DTI has shown that despite most firms admitting to worrying about the financial implications of a tribunal, in more than a third of last year's cases, the individuals and managers involved did not even discuss the problem prior to the employee approaching an employment tribunal.

However, a new law coming into force in October will make it mandatory for all employers to have minimum dismissal, disciplinary and grievance procedures in the workplace.

The regulations will thus place new responsibilities on employers and employees to discuss workplace disputes when and where they happen in a bid to resolve them before they ever reach the tribunal stage.

Employment Relations Minister Gerry Sutcliffe said: "An employment tribunal claim costs an employer an average of £2,000 in management time and legal fees.

"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."