The Government's decisions to remove the default retirement age (DRA) and oblige firms to auto-enrol all employees into a pension scheme will "deal a double blow to smaller employers", according to the Forum of Private Business (FPB).
The trade body has argued that making businesses of all sizes provide pension provisions from 2012 - even if they only employ a single person - will add cost and create extra administrative burdens when small businesses can least afford it.
The move is likely to lead to a drop in the number of permanent jobs being provided by small to medium-sized enterprises and an increase in the use of temporary staff and self-employed labour, the FPB said.
The FPB has also warned that the Government's intention to remove an employers' ability to retire workers as part of its abolition of the DRA will act as an extra disincentive for small employers to recruit.
In response to a recent consultation on the issue, the FPB warned that the removal of important retirement options, which could be effective from as early as April 2011, could leave business owners open to accusations of age discrimination, lead to an increase in employment tribunal cases, and hamper small firms' ability to plan for the future.
FPB spokesman Phil McCabe said: "The Government has stated repeatedly that it wants the private sector to pull the UK out of the economic doldrums by driving job creation.
"Yet by abolishing the DRA and forcing even the smallest of businesses to provide pensions for their staff, it is creating a huge incentive for firms to avoid providing proper, permanent jobs due to the risks and costs involved.
"We appreciate that the Government needs to tackle the pensions shortfall and reduce the costs associated with an ageing population, but it is 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."
The TUC has hit out at sm