Change in holiday entitlement hit SMEs

Mar 31 2009 by Neil Warwick, The Journal

ON April 1 a new law comes into force which increases workers statutory holiday rights by four days.

Last week 150 small businesses were surveyed by Humyo.com, as was the Kudos team at Dickinson Dees, to see what the reaction would be to this new law.

Some 65% of the businesses surveyed did not know about the law which effectively increases a worker’s holiday allowance from 24 days to 28 days including bank holidays and 55% of businesses said that this law would harm them.

The Federation of Small Businesses (FSB) states that 46.8% of the private sector workforce is employed by small businesses.

In the North East the figure is even higher with an estimated 60% of the private sector workforce employed by SMEs.

The FSB calculates that the cost to business will be £1.9bn, based on the concept of an additional four days at seven-and-a-half-hours per day on the minimum wage.

Obviously the cost will be higher as not every single employee will be on the minimum wage.

And 47% of those surveyed claimed that this law needs to be scrapped to help them fight the recession.

Clearly the work-life balance is important which is why the law was first suggested.

However, the law had its passage through Parliament in more benign economic climates. It has been shown time and time again during recessions that small businesses become the life-blood of the economy.

The recently redundant start small businesses, the recently unemployed gain jobs in small businesses, small businesses supply big businesses and new technologies and hyper growth companies emerge.

To hit the sector with another mandatory burden at this point in time seems unnecessary.

It also shows a lack of understanding of small business workforces where a 9-5 day is not the norm and an extra four days holiday is probably a lot less useful than an extra four days pay. Perhaps it is not the law which is being proposed which is wrong, but the timing?

Neil Warwick is a partner at Dickinson Dees law firm.