The government today set out measures designed to give businesses, especially SMEs, added confidence to expand and create jobs.
Reforms to employment tribunals will increase the qualifying period for unfair dismissal claims from 1 to 2 years.
Last year tribunal claims rose by a record 56% to 236,000, and the average cost for a business defending itself against a claim was £4,000. The changes will reduce unmerited tribunal claims and encourage employers and employees to seek mediation to resolve disputes.
Ministers also announced the publication of an Employers Charter which will help small businesses understand their rights and obligations when managing staff.
Prime Minister David Cameron said: "A critical element of the Government's growth strategy is to create the conditions which allow businesses, especially smaller businesses, to flourish and expand, by reducing regulation and maintaining a flexible and dynamic labour market.
"Today's announcements on reforms to employment law are among the first conclusions of our Government-wide growth review, and highlight our determination to ensure that employment law is no longer seen as a barrier to growth, while making sure that employees and employers are treated fairly.
"Giving businesses the confidence to take on somebody new will be a real boost to the economy, and help generate the sustainable growth we need."
Business groups welcomed the government’s proposals. David Frost, Director General of the British Chambers of Commerce said: "Employment tribunals are one of the top business issues and we strongly welcome the Government's move to reform the system.
"The current system wastes business time and money, and distracts employers from growing their businesses and creating much-needed jobs. In particular, the introduction of a fee for claimants will help to discourage spurious and baseless claims."