Staff who work for small businesses could lose their right to claim unfair dismissal under plans being considered.
Ministers want views on whether firms with 10 or fewer employees should be able to sack staff without risk of a tribunal if they pay compensation.
Business Secretary Vince Cable said he wanted the process for getting rid of staff to be "simpler and quicker".
Unions oppose the idea. Labour called for measures to make it easier to hire people rather than to fire them.
Announcing a consultation on changes to employment legislation, Mr Cable said he wanted to help firms expand without making existing staff feel insecure.
The key points include:
- a "call for evidence" on whether "micro-firms" can dismiss staff without their agreement and without them being taken to a tribunal if they pay compensation
- a consultation on "protected conversations", which would allow employers to have frank discussions about poor performance with workers without fear that they could be used as evidence in a tribunal
- a "call for evidence" on the length of time required for a consultation period on planned redundancies; it is currently 90 days, but the government is considering reducing that to 30
- a requirement for all claims to go to the conciliation service Acas before reaching employment tribunal
- options for a "rapid resolution scheme" for more simple cases to be settled within three months
The business secretary also confirmed plans to make people work for two years before they could make a claim for unfair dismissal from April - up from one year at present.
Mr Cable said the proposals would not erode workers' rights but would cut "unnecessary bureaucracy" and reduce the number of cases going to employment tribunal, which have risen 40% in the past three years.
In a speech to the manufacturers organisation EEF, he said he wanted a "radical slimming down of the existing dismissal process" which would help firms grow but protect individual rights.
But he insisted he was not encouraging a "hire and fire" culture.
"There is a genuine concern that if you take measures which create substantial job insecurity this will affect people's general confidence in life and willingness to spend," he said.
"But we have to balance that against the need to create an environment in which firms will expand and take on new employees".
A recent government-commissioned report suggested that what it termed "unproductive workers" should lose their right to claim unfair dismissal.
The Lib Dems were reported to have rejected these proposals from the businessman and Conservative donor Adrian Beecroft, believing they would not help the labour market at a difficult time for the economy.
Mr Cable said the coalition partners were agreed on their broad objectives but he insisted he had "no preconceived views" on what the outcome of the consultation would be.
"The agreement is we need to protect employee rights, maintain job security - that is very important for the economy - but also we need growth."
Business groups, such as the CBI and the British Chambers of Commerce, welcomed the proposals and called for them to be implemented quickly.
"Vince Cable is right to say that dismissal procedures need to be slimmed down," Dr Adam Marshall, director of policy at the British Chambers of Commerce (BCC), said.
"It may seem counterintuitive, but giving companies greater flexibility to hire and fire will provide them with greater confidence to take people on."
But Paul Kenny, general secretary of the GMB union, said the agenda was being driven by big business which "wanted the balance of power in the workplace tilted even more against the ordinary worker".
He said: "These changes will make it harder for hundreds of thousands of workers to bring cases of victimisation, unfairness and bullying at work.
"This will just sweep abuse under the carpet."
Mr Kenny also said a plan to require only one judge to preside over unfair dismissal cases was "retrograde" as it would remove "the voice of business and the shop floor" from proceedings.
Shadow business secretary Chuka Umunna said Labour agreed that the tribunal system - which had 218,000 cases referred to it last year - needed reform.
But he added: "Watering down people's rights at work by doubling the service requirement to claim for unfair dismissal from one to two years is not a substitute for a credible plan for growth.
"Instead of seeking to make it easier to fire people, the government should be looking to make it easier to hire people at a time when their reckless economic policies have pushed up unemployment to a 17-year high."