The Government today sparked a fierce debate over employment rights after calling for evidence on whether rules covering the dismissal of workers were too “complex” and should be changed.
Business Secretary Vince Cable said he wanted views on the idea of "no-fault dismissal" for small firms with fewer than 10 employees - so-called micro companies - under which someone could be sacked with payment of a set amount of compensation.
Mr Cable admitted he was "sceptical" about the idea and needed to be persuaded, but he said there was an argument that firms would recruit more staff if it was easier to fire workers.
"Not all jobs work out for both parties - the staff member doesn't quite fit or simply the relationship has irretrievably broken down, and for micros in particular, who often don't have legal or HR teams, the process to let a staff member go can be a daunting and complicated process.
"We want to give businesses the confidence to hire new staff and make sure when a dismissal needs to be made, they aren't tied up in red tape. This is an effort to see how extensive the problem is and shed some light on the desire for a change to the rules."
He told the British Chambers of Commerce national conference that he wanted views on whether dismissal could be made "simpler, quicker and clearer" without weakening workers' confidence and job security.
The Government said the idea was that small firms would be able to dismiss a worker where no fault had been identified on the part of the employee.
Business groups welcomed the announcement, but unions warned that workers would be "horrified".
John Longworth, director general of the BCC, said: "Employers have long argued that rules around dismissal do not work for business, so a new no-fault dismissal route would be an extremely positive step forward, and would send the message that the Government is serious about deregulation.
"If these proposals are given the go-ahead, it would allow for the swift resolution of a dismissal, and some firms would be willing to pay a premium to achieve this.
"This is a big step in the right direction, but it should be part of a package of reforms, including reforming redundancy rules and introducing tribunal fees for claimants. A substantial overhaul of employment regulations will give businesses confidence to invest and grow, and in turn drive economic recovery."
Simon Walker, director general of the Institute of Directors, said: "Entrepreneurs are crying out for change to make it easier to take on staff. We call upon the Secretary of State to push through reforms in 2013.
"The system does not work. Employers, filled with uncertainty by the risks of removing a member of staff, are wary of taking on more. For employees, the recourse to an employment tribunal only underlines the fact that the system has failed. We need a procedure which is clear and certain for everyone."
TUC general secretary Brendan Barber said: "Employers already have powers to make fair dismissals for misconduct or poor performance. Giving bosses the right to act unfairly may go down well on the backbenches, but it will horrify employees."
Mike Emmott of the Chartered Institute of Personnel and Development, said: "There is no economic case to be made for the watering down of employment rights for businesses of any size. Businesses have far more to lose in lost productivity from a demotivated and disengaged workforce than they stand to gain from the ability to hire and fire at will.
"The consequences for the UK's economic growth could prove particularly perverse when it comes to micro-businesses, who may be discouraged from hiring their 10th worker and may even struggle to recruit high calibre employees because they are seen as low-road employers."