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The Scottish Court of Session (equivalent to the Court of Appeal) has handed down its decision in MPB Structures Ltd v Munro.
It is authority for the proposition that it is unlawful, under the Working Time Regulations, to provide 'rolled-up' holiday pay instead of allowing workers to have four weeks' pay when the holiday is taken.
Some employers, particularly in high-turnover industries, provide a 'rolled-up' hourly rate which includes an element for holiday pay. They then do not pay monies whilst the employee takes his holiday, on the basis that they have already been paid it.
MPB Structures paid a rate of =C2=A310ph, which represented (approximately)
C2A39.25 salary and C2A30.75 specifically for holiday pay. The Court of Session ruled that this was contrary to the Regulations, and that the company was still obliged to make a payment of holiday pay during the four weeks' paid holiday under the Working Time Regulations. The payment of C2A30.75ph could not be set-off against this obligation.
This answers the question which the Court of Appeal largely left open in Gridquest v Blackburn (see bulletin 24/7/02). The question of whether a company, in these circumstances, can recover the 'overpaid' salary of C2A30.7 5ph remains open (but, in my view, is doubtful - a court would probably say it was paid under a mutual mistake of law, and thus the company has no remedy).