The UK's smallest businesses have seen no benefit from the government's moratorium on employment law, it has been claimed.

It has emerged that micro firms – those employing fewer than ten staff – were not exempt from a single regulation last year.

The scheme - introduced in April 2011 –  is likely to make little difference this year also, because micro businesses stand to avoid just one rule in forthcoming equality legislation, the Institute of Directors said.

Alexander Ehmann, head of regulatory affairs at the organisation, said the government believed it was cutting red tape but in reality nothing has changed.

"It's the Emperor's New Clothes," he said. "The moratorium exists but it hasn't been applied to anything. Unless it is applied to something it is meaningless."

He said that the government faces a 'credibility gap' if it can't make the moratorium benefit small firms, adding that ministers could apply the scheme retrospectively to the majority of employment law that entered legislation in 2011.

John Walker, chairman of the Federation of Small Businesses, said: "The government has talked a good game on deregulation. But small firms are still waiting to see action on the ground that matches the rhetoric.

"Firms have still had to get to grips with big changes in employment law and the moratorium for micro-firms is still to take effect."

The government should direct its efforts in tackling the flow of employment law from Brussels, not focusing solely on domestic legislation, Mr Walker added

Abigail Morris, policy adviser at the British Chambers of Commerce, welcomed proposals for 'no-fault dismissals' for micro firms, which would allow small firms to avoid the tribunal system when firing employees.

But she said: "Ministers have good intentions but there is still a volume of law on its way."

A spokesman for the Department for Business said: "We are confident that there will be no significant new burdens on micro businesses as a result of measures introduced between July and December 2011."