The Federation of Small Businesses (FSB) found that 84 per cent of small employers are not using zero-hours contracts, and six in ten of its members were paying every employee at least the new national living wage (NLW) of £7.83 before it came into effect from April.
Its data also showed that, among small businesses that have seen wage bills rise as a result of the NLW increase, seven in ten are reducing profitability or absorbing costs, with 41 per cent increasing prices and 30 per cent curtailing investment plans.
The higher NLW impact particularly affected small retailers and accommodation and food services firms, it said.
FSB national chairman Mike Cherry said: “Small firms often play host to the kinds of supportive, flexible and family-centred working environments than can be found lacking in big corporates.
“What today’s findings show, once again, is that they also reward staff fairly. The vast majority of small business owners absorb rising wage bills by taking less for themselves.
“Ultimately though, high employment costs dent the ability to invest in productivity-enhancing tech, innovation and training.”
Cherry called on the UK government to support smaller businesses by maintaining the employment allowance and delivering on its promise of National Insurance holidays in the Autumn Budget.