The cost of auto-enrolment into workplace pension schemes will wipe out almost all of the savings made by the government's regulation bonfire.
In a report for the Department of Business, Innovation and Skills (BIS) published yesterday, the government says it will save businesses £3.27bn during 2011 by cutting regulations.
However, the audit says auto-enrolment, which will start in summer 2012, will cost employers around £3bn and will "largely offset" the savings made this year.
Between 2012 and 2017, all employers must automatically enrol their eligible employees in a qualifying pension scheme.
Staff members who are aged over 22, earning more than £7,475 and have worked for their employer for at least three months are eligible.
The audit does not include the cost to employers of the new European agency workers directive, due to come into force this Sunday.
The directive grants temporary staff of more than 12 weeks' service the right to the same benefits as permanent employees.
It is expected to cost employers a further £1.5bn per year.
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