The apprenticeship levy, pensions auto-enrolment and increases in the minimum wage are causing significant concern amongst four out of five British businesses, increasing costs this year.
Pensions auto-enrolment has pushed up costs for three quarters of companies surveyed by the British Chamber of Commerce (BCC). Some 23 per cent said it was a "significant" increase.
A fifth of businesses complained that the apprenticeship levy was forcing up costs, while eight per cent said the same about the immigration skills charge.
And if the expected 2020 increase in the national living wage to £8.75 by 2020, 38 per cent of businesses said they would put up the prices of their products or services – and 25 per cent said it would reduce pay growth.
The rise earlier this year increased costs for half of all UK firms.
BCC surveyed more than 1,400 firms in the UK in its annual health check.
Government schemes could lead to reduced opportunities for investment and wage growth, businesses warned.
Jane Gratton, head of business environment and skills at the BCC, said: "There comes a point at which rising employment costs can no longer be absorbed through reduced profits.
"At a time when employers across the country are facing acute skills shortages, it is vital that they have the resources and flexibility to invest in their workforce and the future needs of the business.
“Employment is just one element of the high upfront cost of doing business in the UK. It is the cumulative impact of all of these changes, and the pace at which they are being introduced, that causes the greatest concern and poses the biggest risk.
"There is little scope for firms to absorb any further costs without there being damaging effects on competitiveness, growth and opportunities for people in the workforce."
David Williams, director of corporate engagement at Middlesex University London, which partners with the BCC on the survey, said: “We need to up our productivity to enable us to compete globally in a post-Brexit Britain, so it is important when making difficult choices, the development, upskilling and retention of the workforce is high on the list of investment priorities, and that businesses get the support they need to do this.”