Small businesses, such as pubs, which offer on-the-job training must be recognised with official accreditation, according to the Federation of Small Businesses (FSB).
The FSB's biennial survey of 8,700 members revealed that "learning by doing" was one of the most popular and effective training methods for employees.
The survey also pointed out that much beneficial training is unaccredited by policy makers, leaving small businesses and their employees skilled but with no official qualifications.
Respondents also reported that the Government's 'Train to Gain' programme, which offers training schemes to small firms, is not meeting their training needs. However, the programme has recently been reformed, and the FSB hopes to see new funding allocated to the hardest-to-reach and smallest businesses, which need it most.
Dr Gary Packham, head of Enterprise at Glamorgan University, where the report was compiled, said: "Many small firms are finding that there are basic skills shortages in new staff and that it is not only efficient but effective to train their staff in-house. However, for the smallest firms, providing training can be a challenge, and certainly is a struggle when they train up their staff but aren't recognised for it."
John Walker, FSB National Chairman, added: "It's time that small businesses that give their employees their own very beneficial training are officially recognised for doing so.
"The role small businesses play in this area of training the UK's workforce should be properly acknowledged and the achievements of small firm employees actually recognised under official accreditation.
"In the current economic climate, it is also imperative that the Government, employers and employees invest in the skills they need to both support small businesses and get people back into work during these difficult times."