It wants to get the views of employers and employees as to whether the existing rules are too onerous and too complex, and how well-understood they are.

The government has also called for views on the introduction of compensated 'no-fault dismissal' for micro-businesses, which would allow companies with fewer than 10 employees to part company with a member of staff using a scaled level of compensation.

Business secretary Vince Cable said: "We are already implementing a radical package of reforms to the employment tribunal system and increasing the qualifying period for unfair dismissal from one to two years. These are all measures that will help improve the way businesses hire, manage and end a working relationship.

"But we also recognise that 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."

The calls for evidence close on 8 June 2012.

British Chambers of Commerce director general John Longworth said that when employers have long argued that dismissal rules do not work for business and backed the introduction of a no fault dismissal route.

He said: "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."