New research by Axa Insurance has found that one in four employers at small- and medium-sized companies were involved in litigation cases last year.

Of the 840 companies surveyed, less than half had won a case while one-fifth had faced between two and four actions.

It also found the amount awarded in employment tribunal payouts in 2004 had increased by 45% to 6.2m.

Despite the risk of litigation, almost a quarter of SMEs admitted they were not aware of the extent of their liabilities as an employer.

BPIF commercial solicitor Nicola Langley said there are a number of reasons for the rise in payouts, placing significance on the advent of no-win, no-fee agreements, which actively encourage individuals to pursue claims.