By Tess Ikonomou and Andrew Brown in Canberra

No changes will be made to rules determining the size of small businesses, despite a push from business groups, the federal government has confirmed.

The Australian Chamber of Commerce and Industry wants the legal definition of a small business changed from 15 to 25 employees.

But Workplace Minister Murray Watt has ruled out the move, arguing it would remove industrial rights for a large number of workers.

“There is absolutely no evidence that we need to make it easier for small and medium-sized businesses to be able to unfairly sack workers,” he told ABC radio on Monday.

“About one million workers employed in firms sized between 15 and 25 employees would lose their unfair dismissal rights if they were sacked.”

Deputy Opposition Leader Sussan Ley says the coalition will consider the proposal.

“I hope they do turn into something that we consider seriously through the parliament, because that’s how you affect change,” she told ABC radio.

“That’s how you make the difference to small business’ lives and that’s what’s not happening at the moment, so all of these proposals need careful consideration.”

Senator Watt said workplace laws were shaping up as a key issue going into the election, which is due by May.

“We’re very willing to have industrial relations as a key battleground for the next election,” he said.

The Australian Council of Trade Unions warned unfair dismissal rights would be significantly reduced if the definition of a small business was increased.

ACTU secretary Sally McManus said the change would make it harder for workers to convert from a casual job to a permanent one, or to recover unpaid wages under existing exemptions for small businesses in the Fair Work Act.

“If the business lobby got their way, 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, without having to give workers a reason for why they are working one day and gone the next,” she said.

“It is unfair to expect workers taking on a new job to be on a compulsory statutory probation period for an entire year … and without having access to unfair dismissals protections.”

Analysis by economic research centre e61 Institute found the extensive use of non-compete clauses in contracts was associated with lower wages and fewer workers moving between jobs.

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 up.

Workers at firms that use non-compete clauses extensively were paid four per cent less on average than employees at similar firms that did not use non-competes.

But workers in lower-skilled occupations faced worse outcomes, earning 10 per cent less after five years on the job.

Research manager Ewan Rankin said the clause reduced workers’ power to bargain for higher wages by limiting their future employment options.

“By locking people into jobs that may not be the right fit for them, non-competes may also be damaging economic growth and innovation,” he said.