The Federation of Small Businesses (FSB) says it is "severely disappointed" that the Government will not make the smallest firms exempt from automatic enrolment into pension schemes, due to come into force in 2012.
The Department for Work and Pensions today confirmed that employers of all sizes will be forced to enrol their staff in a company scheme or the new National Employment Savings Trust (Nest).
The FSB has warned that the cost and time spent on administrative work will damage micro-firms - those with 10 employees or less - and that the pension schemes set up by the Government still do not meet the needs of small employers.
Mike Cherry, policy chairman at the FSB, said: "While we welcome initiatives to help people save for their future, we are severely disappointed the Government has not listened to the needs of the UK's micro-firms and has not made them exempt from automatic enrolment into pensions, which will cost employers in time and money."
But the federation did welcome the 12-week exemption period before an employee has to be automatically enrolled. It is also positive about the fact that members of staff will not need to be enrolled until they are earning more than the threshold for their personal allowance on income tax, to help ease the administrative burden.
"We know that small firms do not feel confident in choosing a pension scheme because of its complicated nature, so are pleased that the Government has put in steps, such as the waiting period, to make the administrative burden slightly easier," said Cherry.
The FSB said that the majority of small businesses and their employees are unaware that the country's pension scheme will change in only two years time, and called on the Government to raise awareness of the default pension scheme to ensure that "this ticking time-bomb doesn't hit small firms without effective communication".
More information on automatic enrolment is available here.