Business Secretary Vince Cable will propose that workers face a cut in how much they can win for unfair dismissal at employment tribunals.
He will consult on plans to cut the limit on unfair dismissal payouts to a maximum of 12 months' salary.
He will also propose settlement agreements, in which staff agree to leave without being able to go to a tribunal, but get a pay-off in return.
But proposals to make it easier simply to fire workers will not be made law.
Sarah Veale from the TUC told the BBC that the forthcoming proposals were still wrong.
"The clue is in the term 'unfair dismissal': if people have been unfairly dismissed, this means the employer has done something wrong and it's right that the tribunal should then decide what sort of compensation the person deserves," she said.
But John Walker, of the Federation of Small Businesses, welcomed the altered proposals.
"Too many small firms don't take on staff because they fear being taken to an employment tribunal," he said.
"Other firms fear facing an expensive and lengthy dismissal process," he added.
The current limit on a tribunal claim for unfair dismissal is £72,300 but very few successful claimants are awarded sums anywhere near that amount.
The original suggestion for a new "no-fault dismissal" regulation was controversial among Liberal Democrats.
Mr Cable himself opposed it, while the idea had the backing of many Conservative MPs and business groups such as the British Chambers of Commerce.
The recommendations were first made in a report, commissioned by Prime Minister David Cameron and compiled by venture capitalist Adrian Beecroft.
The Liberal Democrat minister will announce that the government instead supports making it quicker and easier to dismiss staff by using a new settlement agreement.
This would act as an alternative to going to an employment tribunal, which can be costly and time-consuming, and, according to businesses, make bosses less inclined to hire new people.
At the time of the Beecroft Report, Mr Cable said the recommendation that "no-fault dismissals" be allowed was "nonsense", arguing that it was not the job of government to "scare the wits out of people" by reducing their employment rights.
Mr Beecroft responded by calling the business secretary a "socialist" who appeared "to do very little to support business".