The consultation being launched puts forward two sets of proposals that will ensure that those who use the system make a financial contribution but which will also protect access to justice for those on low incomes or limited means.
The Government hopes to relieve pressure on the taxpayer by ensuring that those who use the service pay towards it. It will also help businesses by discouraging unmerited and unnecessary claims and encouraging early settlement of claims.
Under current arrangements, employers complain that claims significantly disadvantage blameless businesses, with few incentives for complainants to choose conciliation or mediation.
Excessive claims may in turn be a barrier to employment and growth, with employers saying that they feel reluctant to recruit because of the risk that they are taken to a tribunal on a whim if things go wrong.
Djanogly said: "The UK taxpayer bears the entire £84 million cost per year of resolving other people's employment disputes at tribunals. This is not sustainable.
"We believe that people should pay a fair amount towards the cost of their case. Fee waivers will be available for people on low incomes to protect access to justice.
"Our proposed fees will encourage businesses and workers to settle problems earlier, through non-tribunal routes like conciliation or mediation and we want to give businesses - particularly small businesses - the confidence to create new jobs without fear of being dragged into unnecessary actions'.
The consultation will put forward two options for consideration:
Option 1: an initial fee of between £150-£250 for a claimant to begin a claim, with an additional fee of between £250-£1250 if the claim goes to a hearing, with no limit to the maximum award; or
Option 2: a single fee of between £200-£600 - but this would limit the maximum award to £30,000 - with the option of an additional fee of £1,750 for those who seek awards above this amount.
In both options the tribunal would be given the power to order the unsuccessful party to reimburse fees paid by the successful party.
Tom Flanagan partner and national head of employment at Irwin Mitchell Irwin Mitchell, said: "This consultation should be welcomed by the business community as it intended to remove barriers to growth and provide confidence when taking on new staff."
"However, when looked at in detail, the proposals might not be workable, might not achieve the intended aims, could be seen as a barrier to justice and could even create additional costs in order to manage the proposed regime.
"It might be worth keeping an open mind on alternatives to charging across the board, including a combination of compulsory mediation with charging at a commercial level but only those who refuse to engage in mediation.
"During a probationary period, dismissal could happen for any reason, subject to the contract. After the end of the probationary period, dismissal could still happen for any reason, at any time.
"If there is 'cause' - something which would need to be defined would probably be a combination of unfair dismissal and wrongful dismissal - the employer would not need to pay anything to the employee, apart from what is provided in the contract.
"If there is no cause, there would be a statutory ratchet of sums sufficient to be a deterrent. This could also be proportionate, to ease the burden on smaller businesses.
"The aim of the whole process is not to help employers to sack poor performers, but to create a simple and cost-effective process to manage dismissals with greater certainty of outcome for both employers and employees. In fact this system might encourage better employee performance management."
There were 218,100 claims to Employment Tribunals in 2010-11, a 44% increase on 2008-09. The cost to the taxpayer rose from £77.8m to £84m over the same period.
It is hoped introducing fees will bring employment tribunals into line with civil courts where claimants already pay a fee to use the service. Just like in civil courts the Government will also continue to fund a system of fee waivers for those who cannot afford to pay.
The Government will continue to fund the cost of ACAS, which helps people in employment disputes reach agreement without the need for legal proceedings, and is free to users.
The consultation will close in March 2012, with a view to introduce the fees not before 2013-14.