Small and medium-sized companies should not be exempt from employee pension schemes, claims the Confederation of British Industry (CBI).

From 2012, employees will be automatically enrolled into a pension scheme, with their employer contributing a minimum of 3% into the fund. However, micro businesses - firms with fewer than five staff - are to be exempt from automatic enrolment.

"Automatically enrolling people into pension schemes is the right thing to do, but the reforms must cover all employers and be easy to implement. We must avoid creating a two-tier pensions system, where a huge number of employees are still left uncovered," said Katja Hall, CBI director of employment policy.

However, the Federation of Small Businesses (FSB) believes any reforms at this stage could be damaging to the UK's smallest companies.

"The FSB does not think that micro businesses should be automatically enrolled because it would add extra regulatory burden, especially for smaller businesses who wouldn't have a HR department that could deal with this issue or know what the best scheme is," said a spokesperson.