We previously highlighted a case where a security company was 'rolling up' holiday pay to its workforce under the WTR. Indeed, we had the foresight to address this and took steps in our Code of Practise (CoRE) to prevent employers doing this. It has just been brought to our attention that a recent legal case, List Design Group Limited –v- Douglas et al dealt with whether, in the absence of an employee’s agreement, employers could "roll up" holiday pay due under the Working Time Regulations 1998 and pay this as part of an employee’s normal salary.

The List case decided that the employer could not do this. On 1 April 2003 the Court of Session in Scotland announced their decision in the case M P B Structures Limited which went further and considered the question of whether it would be lawful for the employer, with the employee’s agreement, to pay holiday pay throughout the working year as a "rolled up" part of ordinary pay, rather than actually paying the holiday pay at the time when leave is taken. The Court of Session considered the purpose of the Working Time Regulations, implementing the European Working Time Directive, which was intended as a health and safety measure, to create a single right to take annual leave and to receive payment for it. The effect of "rolling up" holiday pay could be to discourage employees from actually taking their annual leave, and such an arrangement was therefore prohibited. The Court decided therefore that holiday pay in terms of the Working Time Regulations must be paid at the time the holiday is taken and not otherwise. The consequence in this case was that the holiday pay had not been properly paid, and despite the employer believing that holiday pay had been paid over the course of the year, they were still under an obligation to pay the employees for the holidays they had taken. The importance of this case will be obvious to any employer who operates "rolled up" holiday pay. We would strongly urge that such a system be altered so that holiday pay is paid at the time the holiday is taken. This may mean a change to employees’ terms and conditions, which is never risk–free. Advice should be sought.