Act now to review your employee's holiday entitlement - changing the terms of your
Employees' contracts may head of a real problem in 2009.

Although the law does not require employers to give bank holidays in addition to the statutory minimum entitlement, many of them continue to reward their staffs' long service by giving the extra bank holidays, Christmas and Easter breaks.

This has been the norm for so long that many employees now think of the extra days as a baseline right, rather than the bonus it was originally intended to be.

How many extra days employers give over and above the minimum statutory holiday entitlement is a matter of simple economics and personal choice.

Whatever your stand on the matter, employers would be well advised to review their employment contracts, especially if their terms make reference to 'statutory leave plus UK national holidays'. At a time when the statutory entitlement keeps increasing, making reference to it in a contract may be introducing an unplanned increase in the leave your staff may be expecting to take this year and next.

For a normal five day a week employee, if you take the statutory minimum and add the Easter (2) and Christmas (2) breaks, plus the Bank Holidays (4), the 2008 annual leave entitlement is up to 32 days. In 2009 this will rise to 35 days and in 2010 to 36 days per calendar year.

Many employers will feel obliged to meet the increase in order to retain or attract valued employees. On the other hand, many smaller employers will find it difficult to provide the additional cover and meet the extra costs involved.

A few employers we have talked to already had contracts in place that gave just the minimum statutory entitlement. This is 24 days this calendar year, inclusive of all UK National holidays. It would rise to 27 days in 2009, and 28 days thereafter.

Other employers with contracts that previously made reference to statutory (24) plus bank holidays (4) have moved their inclusive maximum to 28 days this year, which will remain capped to match the new statutory increase to 28 days effective from 1 April 2009.

The more generous employers have just changed their wording from statutory (24) plus UK national holidays (8) to a maximum of 32 days leave, where it will remain for the foreseeable future.

In all three cases, the employers have made changes that have effectively capped future annual leave to either equal or just exceed the statutory minimum. They have been careful, however, to make the changes without taking away any pre-existing entitlement that their staff could object to.

Although no employee will be pleased with the changes we suggest, it is interesting to note that employers seem to meet little staff resentment when they explain candidly why they are amending their employment contracts.

So long as employees perceive they haven't lost any entitlement this year, they don't seem to be too bothered about the loss of the award of extra days next year that they never really had in the first place.

At the moment it all about managing expectations rather than reducing realised increases in holiday entitlements. We suspect that won't be the case as we get nearer to 1 April 2009. Any attempt by employers to limit holiday entitlement just before the increase is due to take affect, may well experience some problems.

Employers: You may find our free 2008 Staff Holiday Planner useful.