Business Secretary Vince Cable has condemned proposals to make it easier for firms to sack under-performing staff as "the wrong approach".
A report commissioned by the prime minister is also expected to call for shorter periods of consultation over compulsory redundancies.
But Mr Cable told the BBC it was not the job of government to "scare the wits" out of people.
Many Tory MPs back the plans as a means to boost the UK's businesses.
The economy re-entered recession in the first quarter of this year and the coalition government is looking for ways to encourage growth.
The report, which was published on Monday, was compiled by Conservative-supporting venture capitalist Adrian Beecroft.
Its proposals include:
- An end to a mandatory 90-day consultation period when a company is considering redundancy programmes. Instead it will suggest a standard 30-day period and an emergency five-day period if a firm is in severe distress
- A cap on loss-of-earnings compensation for employees who make successful discriminatory dismissal claims
- Reform of the rights that workers are allowed to "carry" to new employers when their companies are the subject of a takeover
- Scrapping provisions in the Equality Act which make employers liable for claims from employees for "third-party harassment", such as customers making "sexist" comments to staff in a restaurant
- Shifting responsibility for checking foreign workers' eligibility to work in the UK from employers to the Border Agency or the Home Office
The study follows David Cameron's call for British industry to be freed from "red tape".
Changes to employment law, it is argued, would improve the supply of suitable staff to firms, who would be less afraid of having to make large payouts or face legal action when laying off those who are no longer needed.
The theory is that firms would hire more staff and the change would make the UK a more attractive place to start and grow a business.
The plans, which have not been accepted by the prime minister, have been portrayed as a source of tension between Conservatives and Liberal Democrats.
The Beecroft Report had been due to be published later in the week, but this was brought forward after leaks of what the government called an out-of-date version.
Business minister Mark Prisk told the Commons that action was already being taken on 17 of the 23 Beecroft recommendations.
Mr Cable told the BBC: "Most of it is pretty uncontroversial, but there's one bit which is this so-called 'no-fault dismissal', which some people describe as a hire-and-fire system.
"I don't see the role for that. Britain has already got a very flexible, cooperative labour force. We don't need to scare the wits out of workers with threats to dismiss them. It's completely the wrong approach."
But Mr Cable's department has issued a call for evidence to see whether firms with fewer than 10 employees would favour the no-fault dismissal rule.
When asked whether there was a difference of view between himself and Downing street, he said: "I think we're all on the same page."
Mr Cable has reportedly spoken several times via telephone to Labour leader Ed Miliband since the coalition came to power.
Mr Miliband refused to be drawn on the claims, adding that he had conversed with "lots of people lots of times".
However, his comments on the Beecroft proposals echoed those of the business secretary: "We need an economy based on long-termism, investment and training. We need to get away from an economy based on a short-term, take-what-you-can, fire-at-will culture."
But Conservative MP Damian Collins said: "It would be terrible if smaller businesses were holding back on recruiting because they're worried about whether they can sustain the income they need to keep those people on over the longer period of time."
The prime minister's spokeswoman said the government wanted to "support business, encourage growth, while at the same time ensuring that employees rights to work were not weakened".
She added: "The PM is not wedded to one set of proposals or another, but he does believe he should look at what can make the process (on employment) easier."
Adam Marshall, director of policy at the British Chambers of Commerce, said: "Of course employment rights are important, but should be weighed against opportunities for the unemployed who are looking for work."