Employees who smoke must be given time to attend clinics to help them to quit during working hours without loss of pay, new public health guidance recommends today.

The National Institute for Health and Clinical Excellence (NICE) claims that the proposal will cut the £5 billion annual cost of lost productivity, absenteeism and fire damage caused by smoking.

It believes that a business with five smokers could spend just £66 on providing advice, including the cost of lost employees' time, and see an overall saving of around £350 in improved productivity.

It is the first time that NICE has issued guidance that applies beyond the NHS, effectively including every workplace in England. The recommendations come as all workplaces, from offices to factories and pubs, prepare to go smoke-free on July 1.

Some representatives of industry condemned the proposals, claiming that NICE was "divorced from reality" and that business should not be expected to pay for employees' dependence on tobacco.

Smoking costs the NHS an estimated £1.5 billion each year. Andrew Dillon, the chief executive of NICE, said that the advice was the best means of achieving smoke-free environments that would benefit both employers and employees. "Our advice is based on the best evidence of which workplace ap-proaches are effective for smokers and make business sense for employers."

The recommendations include making information on local stop-smoking services widely available at work and, where feasible and there is sufficient demand, providing on-site support.

Local stop-smoking sessions typically last 14 hours over a six-to-seven week period. These are available on the NHS. People on the course spend two weeks preparing to stop with meetings every week lasting up to two hours. After stopping there are a further five meetings. At the end of that one in two people has given up.

Amanda Sandford, research manager at the charity Action on Smoking and Health, said: "Providing employees are offered help and directed to services with a good track record, this seems a very sound policy."

But David Frost, director-general of the British Chambers of Commerce, which repreents 100,000 small and medium-sized family-owned businesses, told The Times:"My concern first of all is about NICE. It shows how divorced from reality it is. The idea that business should pick up the tab for an individual's problem just shows how far it is from economic reality. It really is for business to create jobs. If people have a problem with tobacco dependence it is up to them to sort that out but not during working hours."

Andrew Lansley, the Tory health spokesman, said: "It should not all be down to employers. The Government in 2000 recognised that occupa-tional health would be required in encouraging employees to give up smoking but appears to have abandoned its proposals in the NHS plan."

However, Mary Boughton, chairwoman of the Federation of Small Businesses Health and Safety, said that small businesses recognised the need to support staff in the workplace.

"This will improve the health of staff and the productivity of businesses. It will also ensure that the new smoking laws are not broken."

Simon Clark, director of Forest, the Freedom Organisation for the Right to Enjoy Smoking Tobacco, said it was "absolutely ridiculous" that smokers should attend clinics in working hours. "It's wrong to expect employers to accept employees taking time off, and I imagine their nonsmoking colleagues will be very unhappy about it."