A fifth of employees believe their staff will flout the new statutory sick pay scheme.
Bosses must now cover at least three days of paid sick leave this year, however one in five say they can't afford it.
Research by Excel Recruitment shows 20 per cent of companies think staff will take advantage of the sick pay and treat it as extra annual leave.
CEO of Excel, Barry Whelan says many companies are going to cut costs elsewhere:
"The feedback from our survey meant that the SMEs felt that the mandatory sick pay legislation hit them at the biggest ever increase in the minimum wage."
"In a year when businesses and employers were really grappling with the cost of living crisis, it may well have a variety of consequences such as wage cuts or a reduction on job perks"