Small businesses are pushing to increase the number of staff they can hire while maintaining legal protections, but the federal government rules out any change.
Business groups call for the legal definition of small business to change from 15 to 25 employees, arguing it would make them more competitive and enable growth.
Increasing the cut-off would ensure small businesses maintain exemptions against more onerous legal requirements on larger counterparts, Council of Small Business Organisations Australia CEO Luke Achterstraat said.
Staff was based on headcount, and not a full-time equivalent figure that is used to determine the number of full-time hours worked by staff, and this strips business of flexibility according to Mr Achterstraat.
"Small businesses are often relying on casual and part-time workers and can have scenarios where they have a head count of 21 or 22 to meet seasonality and as such they're not classified as a small business," he told AAP.
Australian Chamber of Commerce and Industry CEO Andrew McKellar argued increasing the cap would lead to more employment and reduce red tape on small businesses already struggling with higher operating costs.
Employment Minister Murray Watt ruled out any change, saying it would remove rights from workers who would be covered under the staffing increase, by giving more businesses power to unfairly sack them.
Small businesses are not subject to some of the same stringent workplace laws that cover bigger counterparts.
"About one million workers employed in firms sized between 15 and 25 employees would lose their unfair dismissal rights if they were sacked," Mr Watt said.
Australian Council of Trade Unions secretary Sally McManus said the expansion would make it harder for workers to convert from casual to permanent, or recover unpaid wages under small business exemptions enshrined in law.
"This would act as a green light for bad bosses to return to the days when they could hire and fire when they feel like it," she said.
It comes as workplace laws shape up as a key election issue, with the opposition pledging to strip extra worker protections put in place by Labor.
It argues workers' protections such as a right to disconnect, which allows employees to reasonably ignore contact from their boss outside of work hours, stymie productivity and add burdensome red tape to struggling small businesses.
Lower wages and fewer workers moving between jobs have also stemmed from the extensive use of non-compete clauses in employment contracts, analysis by economic research centre e61 Institute found.
One-in-five Australian workers have non-compete clauses, which stop them from competing with their employer in a similar industry or area for a nominated time after their job finishes.
Workers at firms that use non-compete clauses extensively were paid four per cent less on average than employees at similar firms without one.
Those in lower-skilled occupations faced worse outcomes, earning 10 per cent less after five years on the job.
The clauses reduced a worker's power to bargain for higher wages by limiting other job prospects, which also damaged economic growth and innovation, research manager Ewan Rankin said.
