A massive loophole in pensions law that permits employers to do as they please with company schemes - provided they are willing to soak up a hefty fine - has been highlighted by a Birmingham lawyer.

The maximum fine facing employers for failing to consult with their workers over pension changes that will leave them financially worse off, is £50,000.

"That might sound like a lot of money, but compared to running a £3 million a year loss on a final salary pension scheme, it's a drop in the ocean," said David Ashmore, an employment law associate in the Birmingham office of Reed Smith Richards Butler.

But he warns that however tempting the prospect might seem to an employer, the impact of bulldozing changes through without consultation could devastate industrial relations and employee goodwill.

"An employer who is willing to write a £50,000 cheque can make any changes he likes to a pension fund," said Mr Ashmore.

"Failure to consult does not invalidate any changes. However, I would advise employers to tread very carefully because employees are not likely to be very happy.

"Good employers are well aware it is not advisable to play around with people's pensions which are very much the 'crown jewels' of employee benefits.

"Scheme change can be a very emotive process and the key to minimising disruption to a business is meaningful consultation to get employees on-side first. This is an area where companies really should be seeking the best advice they can get.

"Besides the risk of a £50,000 fine, they may inadvertently have given employees a contractual right to particular pension benefits. This could lead to breach of contract or unfair dismissal claims by disgruntled employees."

The issue is especially relevant in the light of new changes to be introduced next year.

The Pensions Consultation Regulations have been in force since 2006, when they were introduced to cover firms employing more than 150 people. This year the bar was lowered to include firms with 100 or more employees. From next April the measures will embrace businesses employing more than 50 - the biggest slice yet of the UK's business base.

"Broadly speaking the regulations say that if an employer changes an occupational scheme in a way that puts employees in a worse position than they were before, then there is a duty to consult with the employee representatives for at least 60 days," said Mr Ashmore.

The regulations are designed to ensure that pension fund members are not caught unawares by proposals to close final salary schemes, or change accrual rates so that members get less pension on retirement but pay the same level of contributions.

He points out that there are also glaring anomalies in the regulations that many employers find confusing.

"The requirement to consult over changes to the pension scheme is linked to the number of employees a company has, not the number of people in its scheme," said Mr Ashmore.

"This gives rise to a situation where a company with several hundred employees might have closed its final salary scheme to newcomers some time ago, but it still has a handful of members.

"If it then wants to make further changes, by altering the accrual rate for example, it is obliged to consult with the few remaining scheme members, even though the majority of employees will be unaffected.

"On the other hand the company next door might have 49 workers who are all members of their scheme, but because the firm falls below the 50-employee level the employer is under no obligation to consult about changes.

"If that firm were to hire two more people the consultation process would kick in, whether or not the new employees joined the company scheme."