The Government says that there were 236,000 tribunal claims during 2010 – an increase if 56% on 2009 – and estimates that businesses spend an average of £4,000 defending themselves against each claim.
Changes to regulations will see the minimum period that workers must have been employed at an organisation before being entitled to claim unfair dismissal being raised from one to two years.
In addition, claimants may have to pay a fee to bring disputes to a tribunal.
All claims will have to be lodged with Acas in the first instance and processes will be speeded up by extending the jurisdictions where judges sit along to include unfair dismissal.
Legal officers will be used to deal with certain case management functions and, once the reforms have been introduced, witness reforms will be "taken as read."
Other, unspecified measures will be introduced to help prevent tribunals over "weaker" cases being disproportionately costly for employers.
Prime minister David Cameron said: "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".
The Confederation of British Industry welcomed the changes. Their director general designate, John Cridland, said: "Extending the qualifying period for unfair dismissal is a positive move that will give employers, especially smaller ones, the flexibility and confidence they need to hire."
But Mark Taylor, partner in the employment team at law firm Jones Day said that the extension of the qualification period would make little difference to employers confidence in employing new people.
"Most employers will decide whether an employee is any good within 12 months, meaning the qualification period two years will probably not materially change the numbers of claims," Taylor said. "In reality, all that is likely to happen is the peak in dismissal rates which currently occurs immediately prior to employees qualifying for unfair dismissal protection will move from the eleventh month of employment to the twenty third month.
Paul Shuttleworth, head of employment law and partner at JCP Solicitors, said that the changes could actually result in claims being made that were more difficult for employers to handle.
"This proposal will not be taken lightly by trade unions who will argue that it will allow employers to dismiss staff before they reach the two year service qualifying period.
"This, in itself could indirectly have an adverse effect on the Tribunal Service in that employees could look at other ways to make a claim through processes such as discrimination, which generally involves more complex issues, which will increase both the time and the cost for all parties involved to deal with."
Trade union Unite said the reforms made it easier for employers to fire workers but harder for former employees to access justice.
Their general secretary elect, Len McCluskey, said: "In reality this does employers no favours. Employers who misinterpret this advice will quickly find themselves in court and the guidance threatens to cause chaos across industry."
