Business Secretary Vince Cable will announce that "no-fault dismissal" proposals are being dropped after a lack of support for the idea among the business community.
Mr Cable has made no secret of his opposition to the recommendation, which many Tories backed, but aides were keen to stress the proposal was being ditched because there was "no significant evidence" that it would help employers.
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.
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