'Rolled up' holiday pay

Marshalls Clay v Caulfield (+ others) [Burton J., 24th July 2003]

A series of five cases which considered the legality of 'rolled-up' holiday pay. The EAT identifies five typMarshalls Clay v Caulfield (+ others) [Burton J., 24th July 2003]

A series of five cases which considered the legality of 'rolled-up' holiday pay. The EAT identifies five types of 'rolling-up' provisions, namely:

(1) contracts which are silent as to holiday pay;
(2) contracts which purport to exclude liability for holiday pay;
(3) contracts where rates are said to include an amount for holiday pay, but there is no indication of specification of an amount;
(4) contracts providing for a basic wage or rate topped up by a specific sum or percentage in respect of holiday pay;
(5) contracts where holiday pay is allocated to and paid during (or immediately before or after) specific periods of holiday.

The EAT held, after analysing the various scenarios, that (1), (2) and (3) offend the Working Time Directive, but (4) and (5) are permissible.

The EAT also gave guidance (para. 37) as to good practice, viz.:

"We would however take this opportunity to give guidance for the future to employers, and indeed trade unions and employees, with regard to rolled-up holiday provisions, in order both to minimise the risk of any such contractual remuneration not qualifying under Regulation 16(5) and in particular, with a view to Health and Safety and the provisions of Regulation 13(1) and in particular Regulation 13(9)(b) to avoid a breach of those Regulations, and hence pro tanto avoidance under Regulation 35(1)(a); in particular any payment made to or agreed with an employee instead of taking a holiday, or with that effect, would be void. In this regard we are grateful to the submissions of Miss Eady for the Respondent in Marshalls Clay and to the written submissions of Mr Camp in Blue Sword, which we have adapted as follows:

o a) The rolled-up holiday pay must be clearly incorporated into the individual contract of employment, and thus expressly agreed.

o b) The allocation of the percentage or amount to holiday pay must be clearly identified in the contract, and preferably also in the payslip.

o c) It must amount to a true addition to the contractual rate of pay.

o d) Records of holidays taken must be kept.

o e) Reasonably practicable steps must be taken to require the workers to take their holidays before the expiry of the relevant holiday year."