More than a quarter of private sector employers are considering cutting holiday entitlement for staff in order to reduce employee benefit costs, says a new nationwide study by Metlife of small and medium-sized companies.

The survey revealed that 27% of companies believe they are too generous with holidays and that 25% are considering cutting paid holidays. 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.

Dominic Grinstead, Managing Director 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.”