The plans include increasing the qualifying period for unfair dismissal from one year to two years, and introducing fees for employees wishing to bring forward a tribunal claim although the size of the fee has yet to be decided.
Business secretary Vince Cable also announced the creation of an Employer's Charter, which entitles employers to ask an employee to take their annual leave at a time that suits their business; asking a woman on maternity leave when she plans to return to work; and asking an employee to take a pay cut. It also entitles employers to dismiss an employee for poor performance and ask about their future career plans, including retirement.
Association of Convenience Stores (ACS) chief executive James Lowman said the plans would facilitate job creation.
"Local shops are job creators and as such are an essential part of the economic recovery. Ministers are right to identify the fear of tribunals as one of the barriers that slow businesses from taking on staff.
"Small businesses, including local shops, are often backed into a corner when it comes to tribunal claims and are required to settle out of court to avoid expensive legal fees. These plans will offer support for employers and take steps to remove avoidable, unjustified tribunal action."
Jonathan James, who owns six Budgens stores in Cambridgeshire and employs 150 people, said it was a "really good, positive move".
"Anything that can mitigate the costs for retailers has to be the way forward. Employment tribunals are a minefield and the legal costs are jobs for the boys," he added. "At the moment, tribunal laws favour employees, so it's much easier to keep a member of staff who isn't very good because the threat of a tribunal is always there they are so easy to get."
Jonathan said he had to pay an "unsatisfactory" employee £10,000 because it would have been costlier to go through tribunal. "But I'd done nothing wrong. As a community retailer you do not want news going round that an employee is taking you to tribunal."
Tribunal claims rose to a record 236,000 last year a rise of 56% on 2009 and businesses have to spend almost £4,000 on average to defend themselves against a claim.