MORE than half of firms expect to increase their workforce in the next year although many are worried that "burdensome" employment regulations could affect their business, according to a new report.

The British Chambers of Commerce (BCC) said a survey of 3,000 companies also showed that three out of five increased pay in line with or above inflation last year.

Around 57 per cent of those polled said they paid their employees at least the Living Wage, with those in catering among the least likely to pay it to all staff.

Around one in 10 businesses said they offered zero-hours contracts and most believed that plans to ban exclusivity clauses which tie workers to one employer will have no impact.

Small and medium-sized businesses and those in computing, mining and energy and construction are most likely to increase their workforce in the next year.

Firms voiced concern that regulations to increase paternity leave and pay, shared parental leave and pension auto-enrolment will have a negative impact on their business.

BCC director-general John Longworth said: "These results show that businesses remain optimistic about both growth and pay prospects for their staff, despite the slowdown in the economic recovery that has been seen over recent months.

"Smaller businesses, particularly within the IT, energy and construction sectors are most confident about job growth, so it is crucial that those businesses are able to find talented workers with the right skills to meet that demand. This relies on schools and businesses working together to develop the talents of our young people.

"Businesses are flexible in their working arrangements, recognising that the well-being of their workforce improves business productivity and, in turn, has a positive impact on growth. However, it is clear that businesses are concerned that additional employment regulation, which can be time-consuming and costly, will affect their bottom line and hamper future jobs growth.

"The majority of our members already offer flexible working, so legislating in this area is unnecessary and will likely push up business costs.

"What we want to see is better engagement with businesses, to help prevent unnecessary regulations in the first place, and for the process to be simpler for firms when trying to implement regulations that are truly important."