Rolled-up holiday pay

* It is unlawful to pay rolled-up holiday pay as an additional amount included in the hourly rate.

The facts

When the right to paid holiday pay was introduced in the UK by the Working Time Regulations 1998 in order to comply with the European Working Time Directive (WTD), a number of employers responded by simply including holiday pay within the hourly rate.

Following a number of conflicting legal decisions, the European Court of Justice (ECJ) was asked to determine whether rolled-up holiday pay is lawful.

The ruling

The ECJ held that rolled-up holiday pay is unlawful. The WTD requires payment to be made for holiday at the time when holiday is taken – it cannot be staggered in the form of part-payments throughout the rest of the year.

Robinson-Steele v R D Retail Services Ltd; Clarke v Frank Staddon Ltd; Caulfield and others v Hanson Clay Products Ltd (formerly Marshalls Clay Products Ltd) C-131/04 and C-257/04 ([2006] IRLR 386)