The Federation of Small Businesses (FSB) says the national minimum wage should vary according to industry and geographical location.
In a submission to the Low Pay Commission (LPC) the group said the current flat rate impacted on businesses in Scotland, Wales and Northern England more profoundly than organisations in the South East.
It says many businesses in the service sector, including hotels, restaurants, shops, care homes and hairdressers are also disproportionately affected.
In October the low pay barrier for adults went up from £4.50 to £4.85, while a similar increase was attached to the low pay barrier for 18-to-21 year-olds. In addition, a new rate was introduced for workers between the ages of 16 and 17.
On average, the headline wage has gone up 7 per cent a year since it was introduced in 1999, a rate which many businesses feel is excessive.
FSB employment chairman Alan Tyrrell said: "The national minimum wage has a disproportionate impact on businesses in Scotland, Wales and the North of England.
"Regional wage variations such as 'London weighting' are standard practice in many organisations and there is now compelling evidence to look at introducing a regional variation to the minimum wage."
According to research by the organisation, one in three hairdressers, one in four hoteliers and one in five shopkeepers routinely see their business costs rise as the minimum wage rate goes up.
The same goes for one in four businesses in Scotland, Wales and northern regions of England but only one in twenty in the South East.
The LPC is currently viewing submissions from industry groups, unions and economists about whether and by how much the minimum wage should rise. It will announce recommendations early next year.
