Having every employee in a small area allows SME owners involved in managing staff to deal with problems amongst their employees early without recourse to legal action, according to Matthew Knowles, spokesperson for the Federation of Small Businesses.

Despite this, it is important, Mr Knowles says, for small business owners to be aware of the legal guidelines associated with resolving workplace disputes, as well as the high financial cost in the event of any legal action.

He explains: ‘What we often find is that, in a smaller business – regardless of whether it’s a shop, or a manufacturing plant or an office – because everyone’s in the same room, these things tend to be nipped in the bud more often and addressed among the staff in question.

‘But the problem is that sometimes, unless there is some legal support for the small business owner – who has to deal with all of this because there is no HR department or finance department – they can innocently fall foul of the regulations because they are so complex,’ he adds.

Government figures have revealed a particular increase in tribunals regarding both equal pay and sexual discrimination in the workplace, with the former seeing an increase from 17,268 in 2005/6 to more than 44,000 in 2006/7.

See also: Small firms face ‘difficulties’ in taking a dispute to tribunal