New staff holiday rule to hit SMEs

Small businesses may have to put their growth plans on hold when changes to employment rules come into force later this month.

The amendments to the UK’s Working Time Regulations are due to be implemented from 25 October.

These will entitle all employees to paid leave from the first day they start work. This also means staff can claim compensation for any leave not taken when their employment ends.

Previously staff had to work for thirteen weeks before qualifying for paid annual holiday. These changes bring the regulations in line with the ruling of the European Court of Justice.

To help employers manage leave-taking during an employee’s first year, the Department of Trade and Industry has introduced an accrual system.

This new ruling means staff in their first year will build up holidays (as agreed with their boss) monthly in advance at the rate of one-twelfth of the annual entitlement each month, rounded up to the nearest half-day.

However, the Forum of Private Business (FPB) says small firms see this “red tape” as “just another nail in the coffin”.

Garry Parker, head of policy at the Forum, thinks this new legislation could result in higher unemployment and lower pay for workers, as businesses have to take into account the extra cost of employing workers.

Small business growth will also be hampered. Businesses which depend on contractors or temporary staff, since they cannot afford full-time workers, might be forced to rethink this strategy.

Forum spokesman Dave Harrop said: “If it’s a fifty-fifty decision between employing temporary or part-time staff or not, this new ruling may well tip it into the negative.”

For further details on the amended Working Time Regulations, visit here.

With thanks to Lloyds TSB Success4Business.

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