Shapps said a Conservative party Government would make it easier for firms to sack underperforming workers and said the reason the party haven't introduced laws yet is because of the coalition.
Labour has attacked his comments and the TUC last night warned employees to be "very afraid" of Conservative employment law plans.
Shapps made the comments during a speech yesterday about how the Conservatives were supporting hardworking British people. He was asked for his comments on firms that employ staff on zero hours contracts.
He began by drawing on his own experience working at a printing company where he was chairman from 1997 to 2009.
"Let me give you an example. I set up a printing company 23 years ago, and we have always sat there and wondered how is it that when you know someone is not working out right for the company, just not fitting into that role, you can effectively come up with disingenuous reasons as to why you need to change that role," Shapps said.
"Either you have to say that role itself is now redundant, and re-engineer how that department operates, or you have to say 'this person is so bad at their job that you must fire them' and it is disciplinary.
"There are only two ways of dealing with wanting to bring a contract to the end - you have to pretend the role has gone or fire the person. Crazy. It doesn't stack up with what really happens out there in the real world."
He continued: "We should as a country say there is a way of saying to people: 'Thank you very much, it has not worked out. Here is a good decent package to move on from this role.' That is not hire and fire."
He added: "Those are the sort of changes the Conservatives would like to see, but have not been able to introduce in this parliament due to the coalition."
Labour said Shapps had to "come clean" on whether he had broken employment law and what he meant by the comments.
Ian Murray, Labour's shadow business minister, said: "Grant Shapps appears to be admitting that he has broken the law by making up 'disingenuous reasons' to sack his own employees."
TUC general secretary, Frances O'Grady, said: "People at work should be very afraid. Rather than bearing down on workplace abuses like the misuse of zero-hours contracts, Shapps reveals that the priority for a Conservative government would be to make it even easier to sack employees.
"Already people have to wait two years - a one year increase - to get protection against unfair dismissal. This adds up to scrapping all protection."
