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Current procedures of employment tribunals are "inflexible and complicated" for small businesses, according to the Federation of Small Businesses (FSB).
Costs involved and the fact that company directors of SMEs tend not to have the legal backup available for larger firms, means they will often settle a workplace dispute before it goes to a tribunal.
The FSB has called for a reduction in the amount of jargon used in current procedures, which would allow colleagues and employers to have a clearer understanding of relevant issues involved.
Reducing legal bills for small businesses would also ensure that tribunal cases are settled fairly rather than being settled before they actually get to a tribunal.
The latest figures from the Tribunals Service, an executive agency of the Ministry of Justice, reveal that the number of employment tribunals in the UK rose by 15 per cent in 2006-2007 to 132,577,from 115,039 in 2005-2006.
The figures also indicate a surge in the number of cases related to equal pay and sex and age discrimination.
Matthew Knowles, spokesperson for the FSB, said: "Regardless of fault, it usually works out cheaper for the business to settle than it does to pay for the legal advice and everything that goes with it. The number of tribunals is probably the tip of the iceberg, really."
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