Employment law reforms announced by Vince Cable will allow company bosses to "exploit and bully" workers, unions have claimed.
The Business Secretary confirmed that controversial "fire at will" proposals have been abandoned but firms are to be given stronger legal protections to pay off under-performing staff. Workers also face a drastic cut in how much compensation they can win in unfair dismissal cases as part of the shake-up aimed at getting businesses hiring again.
Chris Keates, general secretary of the NASUWT, said: "Whilst the 'fire at will' proposal has been watered down, the remaining proposals represent an unprecedented and unacceptable attack on the employment rights of teachers and other ordinary working people.
"The Liberal Democrats should be ashamed to be associated with the introduction of measures which give employers licence to exploit, bully and discriminate against their workforce. However the coalition seeks to spin this announcement, this emphasises the contempt for working people which pervades the coalition's policies."
Mr Cable confirmed that "no-fault dismissal" proposals made in the David Cameron-commissioned Beecroft Report are being dropped after a lack of support for the idea among the business community.
The Liberal Democrat has made no secret of his opposition to the recommendation, which many Tories backed, but aides were keen to stress the controversial proposal was being ditched because there was "no significant evidence" that it would help employers and insisted Conservative as well as Lib Dem ministers were behind the move.
The Business Secretary wants to bolster settlement agreements - where employers can offer under-performing employees a pay off - so they become more widely used to resolve disputes. Under the proposals if the worker accepts the deal it will become legally protected so it cannot be used later as evidence in any court case or tribunal.
Officials insist the move is fair to employees as they are not obliged to take the offer and also incentivises bosses to come up with a good package, which can include a binding promise of a favourable reference.
Mr Cable will also consult on plans to change the limit on unfair dismissal payouts to a maximum of 12 months' salary or set it at a lower figure.
Shadow business secretary Chuka Umunna said: "Ministers should be making it easier to hire, not easier to fire people. We are in a double dip recession due to this Government's failed economic policies, not because of the protections people have at work. Instead of adopting a credible plan for growth, this Government is attacking the rights of every employee in this country."