MORE than 50,000 new jobs will be created in the small business sector this year, according to a new employment survey.

Research by the Small Firms Association, shows that 70 per cent of small and medium sized companies aim to employ more people this year. But despite this growing demand for workers most firms find it difficult to recruit staff.

According to its latest research, the SFA says 80 per cent of companies are running into problems when trying to hire new employees.

Almost half of the firms also reported a big increase in the number of prospective employees asking to be paid "off the books" or in cash.

The survey, based on replies from 236 small companies, suggests that most growth in employment will come in the retail sector, with 16.2 per cent of retail firms expecting to recruit new workers.

Just over 14 per cent of small businesses in the services sector expect to take more people onto their payroll, while 8.7 per cent of manufacturing firms planned to expand their workforce.

Against this strong trend, SFA director, Mr Brendan Butler said companies were increasingly finding it difficult to recruit staff.

Difficulties included lack of skills, lack of interest in the job or a perception that prospective workers were better off on Social Welfare than they would be in a job.

"There is little doubt that the combined effects of the tax wedge and poverty trap means that many small firms are seeing the Social Welfare and tax systems as their greatest competitor in recruiting new employees," Mr Butler said.

Sectors most affected by this included, catering, hotels, retail and tourism, he said.

The SFA said the Budget must have a clear focus on increasing take home pay of low paid workers and removing the disincentive to Social Welfare recipients to actively seek employment.