Four in ten small firms in the UK cite labour costs as a primary barrier to business growth, according to the Federation of Small Businesses (FSB).
The group urged the Government to introduce several new measures to help small firms manage costs without having to cut jobs.
The Office for National Statistics revealed that the number of workers on UK payrolls fell by around 612,000 between March and May.
The early estimates reflect the impact of around six weeks of lockdown, in which large parts of the UK economy were shut from 23 March 2020.
Economists suggest the full effect on employment will not be felt until after the furlough scheme ends on 31 October 2020.
Mike Cherry, chairman at the FSB, said:
"The Government should take a holistic approach to job market interventions, no single new policy will be enough.
"A reduction in employer National Insurance contributions (NICs), or further uprating of the targeted employment allowance, combined with a widening of NICs holidays, would be a good place to start."
Any new measures to reduce pressure on small businesses' costs may be revealed in a fiscal announcement in early July.
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