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Nearly 70% of financial services respondents had some form of 'netiquette' monitoring policy in place, compared to 63% of organisations as a whole.

Emails and website access were the most closely monitored types of activity. But some firms also kept an eye on staff involvement in bulletin boards and chat forums.

Activity that an employer dislikes could carry serious consequences. Although fewer than half the respondents told new employees about their netiquette policies, a quarter said they would dismiss anyone who breached them.

Theo Blackwell of the Work Foundation said: 'Legally, users do need to be informed when content is monitored. This includes instances when software is used for filtering and blocking.'

In particular, employers have a duty to tell employees if they are monitoring personal email.

Peter Carey, a consultant at solicitors Charles Russell said: 'If employees are not told that their emails are being monitored, that constitutes a breach of the Data Protection Act.'

He said that information gathered in this way could not be used in any court case against them.

The Work Foundation research comes in the wake of some high profile email disasters involving City of London employees. A clerk at Credit Lyonnais was suspended after a lewd email he sent to friends escaped into mass circulation.

For more information on the Data Protection Act, visit www.privacydataprotection.co.uk