Small Businesses Plan to Reduce Staff Holidays to Cut Costs

Cash-strapped small businesses considering cutting costs by reducing staff holiday allowances are walking a legal tightrope, an employment law firm has warned.

The message comes after a survey of 400 small firms commissioned by MetLife found that one in four are considering reducing paid holidays to cut costs.

Legally, workers are entitled to a minimum of 28 days holiday per year, including bank holidays. However, Marsden Rawsthorn solicitor James Bellamy said that some employers may be unaware of this entitlement or try to go below it anyway.

“Even if a business is successful in persuading staff to reduce their number of holidays, they still can’t go below the legal limit of 28 days. There is no way around this.”

“Reducing holiday entitlement [above the 28-day limit] isn’t a straightforward process either. You can’t just rewrite contracts without a proper consultation process.”

“Only a minority [of contracts] have a clause that says terms are subject to change, but even then you need to justify your decision with a true and genuine business reason. If you can’t prove that, for example, jobs are at risk due to poor finances, you will find it very difficult to justify your case in a tribunal.”

Bellamy said that if some employees refuse to accept the reduced allowance, you risk dividing the workplace.

“If it’s a small minority that won’t tow the line, then you may be able to justify terminating the contract altogether, but you will need to prove that cutting holiday entitlement was absolutely necessary, and not just a cost-saving exercise.”

Chartered Institute of Personnel and Development adviser Angela Baron said that any money saved in reduced entitlements may well be lost due to decreases in performance and productivity.

“Employees won’t reach their full potential without the breaks they are entitled to. If you work an individual too hard, their productivity drops. We would much rather see companies looking at ways to maximise productivity by reducing stress or adding to their skills.”

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