Company directors today told the government that its plans to reform the employment system were “flawed” and would not tackle the number of weak cases.

The Institute of Directors said ministers should tackle the problem of spurious claims more “aggressively”, by introducing universal employee deposits and giving tribunals stronger powers to dismiss cases.

In its submission to a government consultation, the IoD said the tribunal system had failed, with employers often agreeing to settle in advance rather than face the time and expense of fighting a claim.

More than a third of IoD members said they have had a tribunal claim against them, but of those, only 9 per cent were won by the claimant.

The directors said workers should have to make a financial deposit before making a claim in a bid to deter “spurious” cases.

Director general of the IoD Miles Templeman said: “Being timid will get us nowhere. Employment tribunals need radical reform. Unfortunately, the government’s proposals, although well intentioned, will do little to tackle the problem of weak claims.

“What we need are stronger ‘strike out’ powers for tribunals, universal employee deposits and compulsory pre-claim conciliation. These changes would reduce the number of vexatious claims and the associated costs to business in terms of management time and lawyers’ fees.”

Alexander Ehmann, the IoD’s head of regulation, added: “At the same time that the government is trying to reduce the number of claims with this exercise, it is creating new grounds for bringing claims through abolition of the default retirement age.

“The net result may well be a continuing increase in the number of claims year on year, which makes it even more important that the government revises its proposals so that we have a tribunal system that works for both sides.”

The TUC has warned that the employment rights of millions of workers will be hit under the government’s plans to extend the qualifying period for protection against unfair dismissal from one to two years.