MAXIMUM COMPENSATION payments for fired British workers who later win unfair dismissal cases are to be cut, while employers will be given legal protection to make offers to get poorly performing workers to quit, under new rules proposed yesterday.

British business secretary Vince Cable said he had tried to strike a balance between “not creating obstacles” for small employers to hire, while ensuring workers are not fearful.

The measures were immediately condemned by unions. GMB general secretary Paul Kenny said they would “have precisely the opposite effect” to that intended because they would create uncertainty and stop people spending.

The Federation of Small Businesses disagreed, saying it would encourage firms who are currently afraid “if they take someone on, and it goes wrong, that they’re going to be facing a large bill at the end of it”.

However, Mr Cable has not accepted recommendations from a review last year that wanted employers to be able to sack workers without giving reasons – an idea many Conservative MPs still support.

Under yesterday’s package, the maximum compensation that can be paid for unfair dismissal will be set at one year’s pay, rather than the current, but rarely reached, limit of £72,000. Just 6 per cent of existing awards currently go above £30,000.

British workers must now wait for two years before they are able to bring their cases to employment tribunals under legislation that has already been passed by the Conservatives/Liberal Democrats coalition.

Now, Mr Cable proposes that employers unhappy with an employee will be able to make them a pay-off to quit, including, extraordinarily, the binding promise that they will get a favourable reference.

If the worker accepts the offer then it will become legally protected and they will not be able to use it later in evidence in any court case, or employment tribunal hearing, to argue that the employer had long planned to get rid of them.

“We do want people to settle early and avoid a tribunal process,” said Mr Cable, who said he believed many employers pay up larger sums now to get away from years of argument and legal costs.

TUC general secretary Brendan Barber condemned the changes as “little more than a smokescreen to erode hard–won rights”.