SMALL businesses must prepare to be hit in the pocket by an increase in the level of compensation payments that can be awarded for employment law breaches, according to a local employment law expert at Associa Employment Service.

Associa Employment Service, the leading employment law adviser for small businesses, estimates that these increases could take Britain's total annual compensation bill for unfair dismissal alone close to £20 million.

Julie Blakemore, Associa employment service sales manager for the area including Herefordshire, warned that the rise in the limit on the amount of compensation that can be awarded for unfair dismissal could increase compensation costs to Britain's employers by over £500,000 during 2004/2005.

She said: "Small businesses face a challenging year dealing with employment law changes. This month's increase in maximum awards for unfair dismissal and in statutory payments for redundancy will be another unwelcome cost for many employers.

"New anti-discrimination legislation introduced at the end of last year could leave businesses facing an increase in discrimination claims to handle on top of the unfair dismissal compensation bill."

The warning follows an increase to the limits applying to certain awards made by tribunals, including compensation for unfair dismissal and other payments made under employment legislation, such as statutory redundancy payments. The increases took effect from February 1.

Associa Employment Service operates a subscription based service which helps employers comply with the increasing volume of employment legislation that they now face.

Further information can be obtained from Associa Employment Service on 0870 264 1122 or log on to the Associa Employment Service web-site www.associa.co.uk.