The British Chamber of Commerce (BCC) suggests the government exempt new businesses from upcoming pension reforms so they will be more prepared to take on staff.
Research conducted by the BCC suggests the forthcoming auto-enrolment requirements are the biggest factor discouraging sole traders from taking on their first staff member.
According to the survey, 32% of one-person businesses highlighted the new pensions requirements as a significant barrier.
The BCC suggests new businesses should therefore be exempt from the upcoming legislation until they have been in business for three years or have ten employees.
"[This would remove one of the biggest barriers to job creation," BCC policy director Dr Adam Marshall said.
Auto-enrolment, which comes into effect between 2012 and 2015, means employers must automatically enrol all 'eligible jobholders' into a qualifying pension scheme or NEST.
Contribution payments will also be implemented gradually in the five years from 2012 and, by 2017, total minimum contributions are set to rise to 8%, with 3% from the employer.
There will also be additional costs in setting up schemes and payroll changes.
The BCC study found other employment legislation including dismissal rules and sickness absence rules deters sole traders from taking on employees.
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