Employers will be able to challenge unproductive staff or advise them to consider retirement without worrying about the threat of legal action under plans emerging from the Government.
Deputy Prime Minister Nick Clegg unveiled new measures designed to reduce bureaucracy and restrict inspection for businesses, including the notion of "protected conversations" which would not be eligible for use in tribunals.
"Employers tell us they're afraid to have frank discussions with staff for fear of those exchanges being used against them unfairly, should a dispute end up at tribunal," he said. "We want to give them the confidence to be open about performance, about retirement with their employees."
The move was welcomed by the CBI, which has long called for the introduction of protected conversations as a means of resolving disputes informally.
Neil Carberry, director for employment at the CBI, said: "Employment laws should set a necessary minimum standard in the workplace, but they can get in the way of open and frank communication between employees and employers.
"Protected conversations would provide a safe mechanism which builds confidence in management and helps businesses make better decisions. In countries like France, these enable employers to discuss issues openly with staff without fear of a tribunal."
Clegg said that the Government would introduce a major package of employment law including reform to the tribunal system this autumn.
A wider report produced by venture capitalist Adrian Beecroft, which was leaked to the Daily Telegraph, hints at further changes, calling for the abolition of the concept of unfair dismissal altogether and the introduction of "compensated, no-fault dismissals".
According to the newspaper, the report reads: "The rules both make it difficult to prove that someone deserves to be dismissed, and demand a process for doing so which is so lengthy and complex that it is hard to implement.
"This makes it too easy for employees to claim they have been unfairly treated and to gain significant compensation."
These suggestions were backed by the British Chambers of Commerce (BCC), which said that the fear of tribunals was stopping employers from taking on staff and preventing businesses from growing.
John Longworth, director general of the BCC, said: "This new dismissal route will bring confidence to employers and boost productivity in the workplace, which is good for employers, employees and the economy.
"Ministers must act to bring forward Adrian Beecroft's recommendation of compensated, no-fault dismissal without delay, at the autumn statement."
Last week, reports suggested that the Beecroft review might also propose scaling back other employee rights such as maternity and paternity leave and the right to request flexible working.
But Mike Emmott, employee relations adviser at the Chartered Institute of Personnel and Development, warned that this would make little difference and could be counterproductive for employers and employees alike.
"The argument that the way to get Britain back to work is to water down rights to maternity and paternity leave, to limit the right to request flexible working and to make it easier to dismiss workers without good cause is highly questionable," he said. "None of these would make any meaningful difference to unemployment.
"They would be more likely to harm the prospects of UK plc by fostering precisely the kind of crude and outdated attitudes to employment relationships that will put employees off going the extra mile."
The Government is currently considering the findings of the Beecroft report but a spokesperson told the BBC that it was "unlikely it would go further" on unfair dismissal than the plans outlined by Clegg.
More on this topic is available from XpertHR's Employment Intelligence blog.