Rolled-up holiday pay is legal in England and Wales, but still illegal in Scotland, under new guidelines from the Employment Appeal Tribunal (EAT).
Many organisations incorporate holiday pay entitlement as part of an inclusive – or ‘rolled up’ – hourly rate, generally for contract staff.
The EAT guidelines, which were launched earlier this month, establish when this may be allowed under the Working Time Regulations.
The guidelines are designed to be clearer and easier to use than the previous conditions. They state that there must be mutual agreement for genuine payment for holidays, representing a true addition to the contractual rate of pay for time worked.
The best way of proving this, the guidelines state, is for the provision for rolled-up holiday pay to be clearly incorporated into the contract of employment, or the percentage or amount allocated to holiday pay to be identified in the contract, and preferably also in the payslip.
The ruling remains subject to a final decision on rolled-up pay by the European Court.
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