Phil McCabe, spokesperson for the Forum of Private Business (FPB), made the claim following the government’s approval of an increase to the minimum wage to £5.80 from October.
He said the increase is happening at exactly the wrong time thanks to credit restrictions and spiralling costs.
As a result, the FPB urged the government to freeze the minimum wage in the Budget, but its recommendation fell on deaf ears.
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"The danger is that these measures designed to protect employees – which heap more costs onto small businesses are actually acting as a barrier to employment and also the retention of staff," the representative added.
Meanwhile, the British Chambers of Commerce recently argued for a moratorium on any new employment law to help give businesses a chance to safely ride the global economic storm.
