The minimum wage will rise to �4.85 an hour in October

Next month the minimum hourly rate will increase from �4.50 to �4.85.

The CBI said a survey of 520 companies found that a quarter of them thought next month's rise would have a "significant" effect on their costs.

Larger firms expect the most damaging impact, the employers' group warned, with some saying jobs or hours would be cut to offset the cost.

Concern about "accommodating" the increase was greatest in retail, hotels and restaurants, the CBI said.

It would monitor any impact of the rise between October and Christmas to see if the government had "overdone it".

Compensation culture

CBI deputy director general John Cridland said that pressure to raise the minimum wage to �5 an hour could increase in the run-up to the next general election, expected within a year.

Concern about Britain's "compensation culture" was also highlighted by the CBI.

Its research indicated that two in three firms had reported a rise in "dubious" employment tribunal claims.

Half of those surveyed complained that the tribunal system was "ineffective" and many hit out at the cost of defending a claim.

Almost one in two employers said new disciplinary and grievance procedures from October would not cut the number of tribunal claims.

"With the compensation culture spiralling out of control, companies do not have confidence in the current tribunal system and are sceptical about the difference that government reforms will make," Mr Cridland said.

Working hours

The number of tribunal claims increased by 16,400 in the year to April, and the CBI warned that new legislation on age discrimination in 2006 could spark an "explosion" of more cases.

The survey also showed that most firms were opposed to the UK signing up fully to the EU's Working Time Directive, which aims to limit hours to 48 a week.

Too many CBI members already practise boardroom excess, now it seems they want to keep the poor in their place too Brendan Barber TUC general secretary

More than seven out of 10 employers said scrapping the right of workers to opt out of the limit would have an impact on their business.

The report was published as the TUC Congress was opening in Brighton, when unions were expected to press for the opt-out to be scrapped.

The TUC hit back at the CBI and said there was no long-term increase in employment tribunal cases.

The recent rise in applications was explained by a number of cases involving dress codes which could have been reduced to a single complaint if the law had allowed.

General secretary Brendan Barber said the best way for the CBI to reduce tribunal cases would be to encourage firms to recognise trade unions.

"It looks as if the CBI is getting ready to oppose any further increases in the minimum wage even though it helps fewer than was originally planned and had no adverse effect on jobs," Mr Barber said.

"The minimum wage has been a huge success and further careful increases to boost the income of the low-paid above inflation have always been part of the deal.