Small firms have welcomed changes to the employment tribunal system, saying they should cut the number of "frivolous and vexatious" claims that cost them time and money.

The changes include an increase in fees paid by claimants.

The Federation of Small Businesses said small enterprises could be reluctant to hire employees amid fears that the employment relationship might deteriorate and they would be taken to a tribunal.

This could be costly, time-consuming and distressing for both parties, it said, with the majority of small and micro firms having to spend time away from growing the business to defending a claim.

Roger House, FSB chairman for Kent and Medway, said: "This is now changing with the introduction of a two-stage system of ET fees payable by claimants from July 2013. The FSB hopes this will curb the number of speculative claims and help reduce the perceived risk of taking on staff.

"To date an employment tribunal could be seen as a ‘no cost' option for employees. The FSB hopes the introduction of fees will curb the number of speculative claims, help reduce the perceived risk of taking on staff and provide a fairer balance both for small business employers and employees."

But he called for more changes. Under the current fee remissions arrangement, he said 24% of claimants would have been eligible for a full fee remission in 2009/10 while 53% would have received a partial waiver at hearing so many claimants will continue to be fully or partially exempt from paying ET fees.

“The FSB has called on Government to address this and welcomes recent proposals to introduce a disposable capital test for fee remissions, in addition to a simplified income-based means test."

However, trade unions condemned the changes, with one official claiming they were good "for bad bosses."