Government plans to force companies to provide pensions for employees and eradicate the default retirement age will "deal a double blow to smaller employers" and push them to take on temporary and self-employed staff.
The Forum of Private Business (FPB) argues the government measures on pensions, due to take effect in 2012, will "add cost and create extra administrative burdens when small businesses can least afford it".
FPB spokesman claimed abolishing the retirement age and forcing companies to provide pensions for staff would create "a huge incentive for firms to avoid providing proper, permanent jobs due to the risks and costs involved. Instead, they will increasingly be forced to use temporary staff and self-employed labour in order to remain competitive".
While the FPB accepted the government needed to tackle the pensions shortfall and reduce costs associated with an ageing population, it was "unfair and counter-productive that businesses struggling to emerge from one of the worst recessions in living memory should be expected to foot the bill".