EAT rulings on rolled-up holiday pay may reduce claims

The
number of firms taken to tribunal by staff over alleged unpaid holiday leave is
predicted to fall following recent rulings by the Employment Appeal Tribunal
(EAT) on ‘rolled-up’ holiday pay.

Sharon
Latham, an employment specialist with law firm Clarke Willmott, believes that
the decision by the EAT – that in many cases, ‘rolled-up’ holiday pay can be
allowed provided it is clearly incorporated into contracts of employment – will
reduce employment tribunal claims on this subject.

Rolled-up
holiday pay essentially pre-pays workers for holidays by including an
additional allowance in their hourly rate of pay.

This
means employees do not receive payment for holidays as and when they take them
but must instead budget their wages accordingly to cover holiday leave.

This
payment method has been criticised by some workers’ groups as there is seen to
be less of an incentive for employees to take holidays.

Latham
said that confusion has arisen over the legality of rolled-up pay clauses in
employment contracts since the introduction of the Working Time Regulations in
1998, which entitle staff to four weeks’ paid holiday.

She
urged employers using rolled-up holiday pay to make it very clear to staff that
holiday pay is incorporated in their hourly wages.

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"Make
sure your staff understand that their wages are slightly higher to accommodate
for holiday pay and that they realise this additional money should be put aside
to cover time-off for holidays," said Latham.

By Ben Willmott