More than one small business in four is considering reducing its employees' annual leave entitlement to cut costs, research by insurance firm MetLife suggests.
The study found that 27% of small businesses believe that current levels of holiday offered to staff are too generous, with employers wanting to reduce this by an average of four days per year.
The research also found that more than one-third of employees would be open to reducing the amount of holiday that they receive, but only if they were to gain a pay rise instead.
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 small and medium-sized enterprises, 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 to gain the maximum value for their business and their workforce."
Despite the desire among employees for a pay rise, just 8% of employees working in small firms believe that they will definitely get one in the next 12 months, with 60% admitting that this is unlikely to happen.
Twenty-eight per cent of staff say that they have not received a rise in the past two years, with many small businesses looking at alternative options.
More than one-third (36%) of companies say that they are considering offering additional unpaid leave to staff in a bid to save money, and 48% of employees say that they have already been made such a proposal.
A further 42% of staff have been offered the ability to work flexible hours, while 25% say that their employer has suggested increasing pension contributions.
Companies are currently obliged to offer employees 28 days' holiday per year, including eight bank holidays.
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