Holiday pay

Paying ‘rolled-up’ holiday pay to satisfy a worker's entitlement to paid annual leave is unlawful, the European Court of Justice has ruled.

Some employers designate as holiday pay part of each pay packet received by employees, who are then not paid during their holidays. This method of payment is convenient for employers, but can discourage employees from actually taking their leave entitlement.

The issue was referred to the European Court of Justice following conflicting decisions in the UK courts. The European decision is not immediately binding on employers, but it could help employees win claims at employment tribunals and may result in a change in UK law.

If you are one of those employers who uses ‘rolled-up’ holiday pay, you should now consider changing to an arrangement under which employees receive holiday pay for the period in which they take their actual leave. House.

Employers who continue paying rolled-up holiday pay should ensure that the arrangements are transparent and comprehensible to employees. The European Court ruled that in such cases, the sums already paid may be set against payment due for specific leave actually taken by a worker.