Holiday Pay - Stick, Twist or Roll Over?

David Reid
1st Apr 2005

We all know that workers must receive at least 4 weeks’ paid holiday each year. But working out how much to pay staff for holidays still causes confusion. Rolling up holiday pay into the hourly rate is a simple solution – but is it lawful?

UK Money

We all know that workers must receive at least 4 weeks’ paid holiday each year. But working out how much to pay staff for holidays still causes confusion. Rolling up holiday pay into the hourly rate is a simple solution – but is it lawful?

In Scotland, both the Employment Appeal Tribunal (EAT) and the Court of Session have held that rolling up holiday pay is unlawful, largely on the basis that receiving no payment during holidays would discourage workers from taking holidays.

  • The percentage of hourly rate allocated to holiday pay must be specified in the contract of employment, and should also be identified in the payslip;
  • There must be an enhancement to the hourly rate for holiday pay – you cannot say to employees that their existing rate now contains an element of holiday pay when it did not do so in the past;
  • Employers should take all reasonable steps to ensure that every worker takes at least four weeks’ holiday each year, and keep records to prove it.
  • For workers based in Scotland, the advice to employers must be not to operate rolled up holiday pay for the time being.
  • For workers based in England or Wales, employers who operate rolled up holiday pay should do so with caution. Ensure that your scheme is transparent and backed up by the appropriate records. Take specialist advice on the lawfulness of your scheme if in doubt.
  • If your workers do have irregular patterns of work but you cannot operate rolled up holiday pay for legal or practical reasons, take specialist advice on the alternatives that might be available to you.
  • Remember that these rules relate only to the statutory minimum four weeks’ paid holiday per annum. For any additional holiday entitlement your organisation offers, you are free to agree an element of rolled up holiday pay with your workers
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