For many employees, the Christmas party is one of the highlights of the company calendar.

As the worries of the working day are set aside, the annual shindig is a chance to enjoy the rewards of a year's hard work, courtesy of the boss.

But for those organising the office Christmas party, it can be the source of headaches rather than a chance to celebrate. It has the potential to be the most volatile day of the year for businesses, a time where a combination of any tensions or underlying issues combine with alcohol to create an explosive cocktail.

Before the big day, when the event is in its planning stages, there are already numerous pitfalls to consider. With many businesses enjoying a multicultural environment, there may be members of staff who will not wish to attend the Christmas party on religious grounds. For the party organiser, the line between gently encouraging and pressuring staff to come along to the event can be a fine one, that must be treaded carefully.

Like it or not, having a drink 'on the boss' will be the main appeal for many employees. Studies* have shown the average office Christmas partygoer will consume about seven units of alcohol, the equivalent of five small glasses of wine or three pints of lager. And while this may seem a reasonable amount for hardworking employees making the most of an annual opportunity to let their hair down, there will always be someone guilty of overindulging. Everyone knows a story about a friend of a friend who photocopied a body part, flirted inappropriately with his or her boss, or vomited in a wastepaper bin, leading to a rather messy clean up, literally or figuratively, for the individuals concerned and their managers the next day.

Companies employing young interns also face the difficult prospect of preventing alcohol consumption by underage drinkers, even if soft drinks are provided.

The relaxed atmosphere of a Christmas party, combined with free flowing alcohol, can be a recipe for disaster when it comes to office romances. Two colleagues who may have indulged in a harmless flirtation could suddenly find themselves waking up with a little more to regret than just a hangover. This could lead to ongoing issues such as a disrupted team dynamic, loss of respect from colleagues and personal embarrassment from both or one of those involved.

Worse still is when advances are unwanted, exposing companies to potential sexual harassment claims. And harassment can be physical or verbal - staff making comments that they see as lighthearted and good-natured could be perceived as offensive by others. In one well-documented case, a senior lawyer at an investment bank publicly told a married female colleague that she had a "great cleavage", among other inappropriate comments. It resulted in a rumoured £1million out of court settlement.

Health and safety regulations are enough to put the pooper into any party, but are a modern-day legal requirement for many office gatherings. In fairness, tinsel ignited by an electric fire, emergency exits blocked by a buffet table and the office jester falling head first down a flight of stairs do not really add much festive joy to the party. Of course, going overboard on the rules can ruin an event almost as much as ignoring them, so erring on the side of caution without killing the party atmosphere is a balance that needs to be struck.

If all this wasn't enough to worry about, business owners should only be able to breathe a sigh of relief once all employees have stumbled home safely, as companies who have provided employees with alcohol could be liable for any drunken transport disasters following the event.

Companies who have organised transport for staff, or at least ensured they are all briefed on travel options and encouraged to prepare head, will be able to rest considerably easier than those who leave staff to their own devices.

Despite all these issues, companies who put on an enjoyable and memorable Christmas bash will find they have appreciative and happy employees, and satisfied staff leads to a productive work environment.

Dan Watkins, director at Contact Law