· News

SME employers forced to cut holiday entitlement to reduce employee benefit spend

More than a quarter of private sector employers are considering cutting holiday entitlement for staff in order to reduce employee benefit costs, new research from MetLife shows.

The nationwide study Based on an independent phone and online survey by BDRC Continental Research among 403 small and medium-sized companies (which employ more than 22.8 million people and represent nearly 99% of all UK companies) reveals 27% of companies believe they are too generous with holidays and that 25% are considering cutting paid holidays.

More than a third of employees would be willing to work longer, the study shows, but only if they receive a pay rise. The nationwide study shows nearly six out of 10 employees believe they are unlikely to receive an annual pay increase in the next 12 months and 28% last had a pay rise more than two years ago. Pay settlements in the private sector are currently running at an average of 3% - i.e. below inflation - while public sector staff face a pay freeze.

Currently all full-time workers have the statutory right to 28 days holidays including Bank Holidays but the MetLife study reveals a potential change in attitudes by employers and employees to holiday entitlement as part of the overall employee benefits package.

Employers in the research say on average they would aim to cut around four days paid holiday in order to contain costs with 36% of employers saying they are considering offering additional unpaid leave to staff. MetLife commissioned the research as part of its global focus on Employee Benefits, which includes plans to explore opportunities in the UK market in the SME sector in particular.

The insurance giant has today launched its MetLife 2011 International Employee Benefits Trends Study, which reveals a combination of concern over financial security and a desire among employees worldwide for improved financial planning and education. MetLife is urging employers to give greater emphasis to providing employee benefits, including programmes like financial planning, as a strategic investment in the long-term success of their business.

Dominic Grinstead, MD at MetLife UK, said: "Employers are starting to question the overall value of their employee benefits package and paid holidays are clearly an expensive part of the package.

"The ongoing UK economic recovery will rely heavily on SMEs and they need to contain costs. Employees are willing to be flexible to support their employer but will want something in return.

"Employers should recognise that commitment and take a wider look at employee benefits in order to gain the maximum value for their business and their workforce, as a strategic approach to employee benefits can add real value."

The study shows 10% of employees have been offered an enhancement to their employee benefit package in lieu of a pay rise. Of those 48% have been offered more paid holiday in return for not receiving an increase in pay while 42% have been offered more flexible hours and 25% have been offered increased employer pension contributions.

Just 8% of employees believe they will definitely receive a pay rise in the next 12 months, the study shows.