The CBI has withdrawn its support for the government's plans to extend paid maternity leave from six months to nine, it has been revealed.
Maternity leave is set to be extended from April 2007
It has made the move since the chancellor withdrew plans to allow firms to pass the handling of maternity pay over to HM Revenue and Customs.
CBI boss Sir Digby Jones laid out the business group's concerns in a letter to Trade Secretary Alan Johnson.
But the government said extending paid maternity leave could benefit firms.
A copy of the CBI letter was obtained by the Financial Times.
Sir Digby said the CBI backed extending paid maternity leave from six to nine months in April 2007 as "part of a package that also offered a real reduction of the administrative burden on employers", such as passing over a lot of the administration to HM Revenue and Customs.
"Given that the burdens on employers will now not be compensated through adequate additional support, I regret the CBI can no longer support your proposals to extend family-friendly legislation," he said in the letter.
The government's plan to extend maternity pay was part of its manifesto at the last election.
Chancellor Gordon Brown withdrew the HM Revenue proposal in his recent pre-Budget report, saying the costs were "disproportionate" to the benefits to business.
Sir Digby warned that the U-turn has reduced firms' faith in the government's pledges to reduce red tape.
"This regulatory package was seen by CBI members as the first test of the government's commitment to the better regulation agenda," his letter added.
In response, a Department of Trade and Industry (DTI) spokesman said there were plans to cut the regulatory burden on firms to the tune of £1bn.
"The government firmly believes that offering flexible working conditions helps employers to recruit and retain the best candidates from the widest pool of talent...this package overall is good news for employers as well as employees," the spokesman added.