The number of firms taken to tribunal 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 the EAT’s decision that rolled-up holiday pay can be permitted in many
cases – provided it is clearly incorporated into contracts of employment – will
reduce employment tribunal claims on the subject.
Rolled-up holiday pay essentially means employees are pre-payed for holidays
by including an additional allowance in their hourly rate of pay. This means
they 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 it is
seen to reduce the incentive for employees to take holidays.
Latham said confusion had arisen over the legality of rolled-up pay clauses
in employment contracts since the introduction of the Working Time Regulations
in 1998, which entitles 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.
"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.
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