Third of employees would accept the cut - if they get a pay rise, research shows.

A nationwide study by MetLife among small and medium-sized companies – which employ more than 22.8 million people and represent nearly 99% of all UK companies - reveals 27% of companies believe they are too generous with holiday entitlement and that 25% are considering cutting paid holidays in order to reduce employee benefit costs.

More than a third of employees would be willing to work longer, the study shows, but only if they receive a pay rise. Nearly six out of 10 employees believe they are unlikely to receive an annual pay increase in the next 12 months and 28% last had a pay rise more than two years ago.

Just 8% of employees believe they will definitely receive a pay rise in the next 12 months.

Holiday cut of four days on average

Currently all full-time workers have the statutory right to 28 days holidays including Bank Holidays but the study reveals a potential change in attitudes by employers and employees to holiday entitlement as part of the overall employee benefits package.

Employers in the research say on average they would aim to cut around four days paid holiday in order to contain costs with 36% of employers saying they are considering offering additional unpaid leave to staff.

Enhancement of benefit package

The study shows 10% of employees have been offered an enhancement to their employee benefit package in lieu of a pay rise. Of those 48% have been offered more paid holiday in return for not receiving an increase in pay while 42% have been offered more flexible hours and 25% have been offered increased employer pension contributions.

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 SMEs 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 in order to gain the maximum value for their business and their workforce, as a strategic approach to employee benefits can add real value."