Holiday Pay

Workers are entitled as the law currently stands to four weeks’ paid holiday a year.

Quite a lot of employers, particularly those who employ temporary, season or shift workers have adopted a practice of paying the worker an additional amount each hour or week on account of holiday pay rather than paying the worker when he or she actually takes a holiday. This is known as “rolled up holiday pay”.

The Employment Appeal Tribunal in England decided that this was legal whereas the same tribunal in Scotland decided that it was not. Not really very helpful!

So, to decide whether it is legal under European Law, a case was sent to the European Court of Justice for a decision.

The Court have now decided that employers should be paying holiday pay when holiday is actually taken. This means employers need to renegotiate contracts involving “rolled up holiday pay” for existing workers as soon as possible.

Does this mean that workers currently receiving an amount on account of holiday pay each week can cash in and bring a claim for holiday pay. The answer is probably no; the European Court ruling seems to allow for clear rolled up holiday payments to be made while the practice is discontinued. By ‘clear’ the Court means that the weekly or monthly amount allocated to rolled up holiday pay should be clearly identified on the workers’ pay slip.

This decision makes legal sense. Paid holidays were introduced because it helps the health and safety of workers to have four weeks’ paid holiday a year. If I am paid the minimum wage and receive a small additional payment for each hour I work on account of my holiday entitlement, I will probably spend the money. This will mean that I may not be able to afford to take all or any of my holiday entitlement because I won’t actually be paid when I am on holiday. It also means that if I carry on working, I won’t get the health and safety benefits of a holiday.

However, the ruling will make life difficult for many employers and quite a few workers. Let’s say I am a temporary worker – I work one week here, two weeks there, for an agency. I am still allowed my four weeks’ paid holiday, but how is the agency going to know when that is so that they can pay me and how are they going to work out how much paid holiday I am entitled to? There is quite a big chance that some workers, particularly temporary or casual, will get fleeced if they are not aware of their rights.

The lesson for employers is that if you do currently pay rolled up holiday pay, first make sure the payment is clearly identified on the workers’ pay slips and secondly think about stopping the practise as soon as possible.

The lesson for employees is if you have any questions about your holiday entitlement, bring them up with your employer or agency in the first instance.