Our holiday entitlement may be amongst the lowest in Europe, but luckily we're tough enough to take it. However, whether UK business is tough enough to take further increases in statutory annual leave is a question that remains unanswered. Matt Henkes reports.

It probably won't come as a surprise to anyone that the UK currently props up the EU table in terms of paid annual leave. But with 28 days annual holiday from April next year (that's 28 days more than US workers are entitled to), are we really that hard done by?

Research from Mercer last year showed holiday entitlements within the EU were something of a 'lottery', with discrepancies of up to 16 days between countries. UK annual leave has changed in recent years following Labour's pledge to increase paid leave to 28 days a year.

Unlike some European countries, UK bank holidays are not a statutory right. By increasing the annual leave allowance to 28 days, the government has addressed the issue of some employees being made to take public holidays as part of their leave.

The table below shows the public holidays and statutory holiday entitlement for each EU country. As the UK bank holidays are not a statutory right, the total for this country remains at 24.

There are some who feel bank holidays should be done away with altogether. Dr Eamonn Butler, writing on the Adam Smith Institute blog, calls them an anachronism. "By all means have a regulation that employers must offer their staff reasonable holiday entitlements," he writes. "But let workers take those holidays as and when they and their employers decide, and spare us all that transport gridlock. Maybe the weather might improve, too."

The Scandinavian condition

Despite having Europe's highest suicide rate, Finland currently tops the annual leave table with an amazing 44 days. The Embassy of Finland explains that, on average, Finnish employees will receive only 33 days of annual leave. However, in certain industries, employees benefit from something called 'pekkanen', which allows people who work 40 or more hours a week to take an extra 12.5 days off a year.

"At my previous British workplace they always said that Scandinavia is closed from midsummer until August," says Embassy spokesperson Sohvi Innanen. "But Finland's employers do not suffer from these long holidays as the hours have already been worked.

"I think there are low or lower levels of work-life conflict in Finland compared to the UK," she adds. "But I would not put it merely down to long holidays."

The average full entitlement across the 27 EU states is 34 days. Next year's increase to 28 days in the UK was part of Labour's election manifesto and has been welcomed by workers' rights lobbyists such as the TUC. "The government deserves credit for addressing this by increasing statutory leave and committing to a further increase in 2009, which will benefit more than 2 million workers," says TUC general secretary Brendan Barber. "Although the UK still lags behind the EU average in terms of statutory annual leave."

Prepare for the hit

So, should more be done to bring us into line with the rest of Europe? Guy Bailey, the CBI's senior policy advisor on pensions and employment, says there are no signs from government of a move in that direction. "I don't claim to be mystic Meg, but I think we're at a fairly sensible level at the moment," he says. "We do pretty well compared to America, where they really are chained to their desks."

Should that change, the CBI would urge government to consider vary carefully the impact and costs to business of employment regulation. "You can take a UK average of the cost to business of increased annual leave but that doesn't actually tell the story of the firms that are affected by it," says Bailey.

The £3.3bn to £4.4bn cost of implementing the change the government's regulatory impact assessment predicted will not be as evenly spread around as we might like to think. "Leisure firms that are traditionally busy on bank holidays are those types of places that will really take a hit," he adds.

A large number of organisations already offer over 28 days annual leave and for these companies, the increase will mean very little. But what can other businesses do to prepare for the 'hit' of increased staff holidays?

Charles Cotton, CIPD adviser on rewards and employment conditions, highlights the fact this all comes against a backdrop of the credit crunch and ongoing uncertainty in the world economy. "They are going to have to look at ways that they can afford to cope with it," he says. "It's for the organisation to ask how it can boost productivity to take account of the fact they're going to be losing a certain amount through extra holiday."

Now there are fewer of them, companies should think about how they can fill working hours in a smarter way to meet their productivity needs. Whether it be through more flexible working, better staff engagement or imaginative employee rewards, it's imperative that when workers aren't sunning themselves on a beach somewhere, they're making the most of their time in the office.