The new auto-enrolment pension contributions regime will push up employment costs and risks making UK companies uncompetitive compared to overseas rivals, according to research by UHY Hacker Young.

A worker earning £18,740 currently costs a UK employer £1,553 per year in national insurance contributions on top of their salary (8.3% of salary), the lowest level in the G8.

Under the new rules, from 2018 the firm says UK employers could have to pay £1,916 for the same employee, a higher amount than a US (£1,654) or a Canadian company (£1,712) pays.

UHY Hacker Young calculated the value of employment taxes and social security payments that companies make internationally on top of the gross salaries they pay to their employees.

The study shows the UK currently ranks at number eight for lowest employment costs for employees earning £46,849, with employers paying an extra £5,361 in national insurance contributions per employee.

Under the new pension rules, the UK would drop to 13th position for the same workers, with employers paying £6,477 per employee, per year - making it cheaper to employ a worker in countries like the US, Canada, Ireland, Denmark, or China than in the UK.

Roy Maugham, UHY Hacker Young head of tax, said: 'When international businesses look at where they base their operations, the cost of employing a worker in terms of salaries and taxes is a key consideration. The high costs of employing skilled workers in the UK may make many businesses think twice about starting or keeping operations in the UK.'