'Rolled up' holiday pay

JodieR

I've always thought that adding a % for holiday pay onto regular hourly pay wasn't allowed any more, but a client of mine has recently attended an employment seminar hosted by business link and was told that when you're employing casual staff that it's alright to pay holiday pay in this way provided that it's clearly stated on the payslip. Is this correct?

stefanboro

Straight from the horses mouth:

http://www.direct.gov.uk/en/Employment/Employees/Timeoffandholidays/DG_10034711

"Holiday pay should be paid for the time when you actually take your holiday. Your employer cannot include an amount for holiday pay in your hourly rate (called 'rolled-up holiday pay'). If your current contract still includes rolled-up pay, you and your employer should renegotiate it."

JodieR

Thanks, that's what I thought... but the client questioned it with business link and the speaker has come back defending herself saying:

'Rolled up holiday pay was not the same thing that I was talking about. This was the "claim" that the hourly rate included holiday pay so additional holiday pay is not payable.

What I am suggesting is for some casual staff an additional payment is made in relation to holidays on a weekly or monthly basis. This practice is followed by many organisations that employ casual and non fixed hours staff. '


As far as I'm aware what she's referring to is 'rolled up holiday pay' even if she's not calling it that and I'd like her to reference it back to ACAS or similar guidence which indicates that this is all above board, but I just wanted to check here first in case I've got the wrong end of the stick!

Monsoon

The problem with casual part time employees is that as hours aren't fixed, arguably you can take holiday on a day you weren't working anyway. I can see how it would be easy to formalise that in a "monthly holiday pay" arrangement. That might be what she was referring to, but my understanding is the same as yours, in general Rolling Up is not allowed.

JodieR

Yeah, it is such a grey area - I spoke to ACAS today and they basically said it contravines the working time directive so it shouldn't be done, and then in the next breath said that it is still used and that's alright if it's clearly stated on the payslip and then I said something along the lines of 'So is it alright to use this method if your employees only work occasional irregular hours as they couldn't really complain about not being able to afford to take time off to get a rest' and the ACAS man replied that ACAS will never say that it's alright to use this method and suggest that you get legal advice before considering it.

clear as mud then! luckily the client in question doesn't particularly want to use the rolled up method so I'll not be taking it any further!

Monsoon

That make sense.

If someone is working part time irregular hours, chances are they won't go over the working time directive thresholds and so rolled up holiday pay doesn't cause a problem - but strictly speaking its not allowed. As you say, clear as mud!

I would trust ACAS over Business link.

JodieR

I also read somewhere that it looks like an employee can bring an employer to tribunal for not paying them when they are actually on holiday and will probably win the case, but the employer won't actually have to pay them any compensation as they've already paid the equivilant as rolled-up holiday! no wonder I can't get my head around it!!

Rachel

At my husbands work they got all tied up with this and involved a solictor. The solictor said that the best way was to rota them working but then put it down as holiday, this was crazy and made the rotas a waste of time and everyone was confused. So they went back to the % way rightly of wrongly and it seems to be fine again for casuals.

payrollpro

Jodie,

Your spot on. The EU has made it clear time and time again that the only way an employer can satisfy the directive (forget the regs, they are useless and about to be declared unsatisfactory once again!) is to make a payment at the time the person takes the holiday. Anything else is unlawful.

However, this will only be an issue if the employee decides to make a complaint and if they do they will win but the tribunal will be unable to award compensation if the payslip clearly indicates that the payment of holiday pay was made.

Bizarre, but that's the way it works. Of course the complainant might want to take the case to the ECJ in which case they will have the payment made with their wages set aside to be replaced with a payment of holiday pay, but then they would have to repay the payments made and then accept a new payment!!!

Employment law - don't you just love it?

Payrollpro

Monsoon

They can complain but won't get compensation because they've been paid, albeit wrongly? What a farce.

I have part time employees on irregular hours and calculating holiday pay is an utter pain, so I understand why employers want to roll up. I wouldn't do it though, nor would I give my clients the option.

zara5034

For part time, irregular workers, I use the 12.07% method, does anyone else do this?

JodieR

Yes, I don't think that there's any dispute that workers earn 12.07% of their wages as holiday pay, it's just the question of whether it's alright to pay the accrued holiday weekly/monthly with their regular pay or whether it should be put aside for when they actually take time off.

jenny3549

I use the 12.07% method also but this is just to calculate how much they have accumulated. I either pay it to them on leaving or, if they are with us for long enough then they can use it towards time off.

Saying that, I've just had this argument with my bosses wife who insists it should be paid to them weekly as that is what she has always done and since she runs a recruitment agency says she knows what she is talking about!!

payrollpro

Jenny,

The problem with that argument is that it was just such practices within the recruitment industry which prompted the EU driective in the first place!

One method I like, which some agencies do, is to work out the value of the holiday each week but instead of paying it, it shows on the payslip as accumulated holiday entitlement and the worker then calls off whatever amount they want when they take a holiday. It satisfies the law as no payment is made unless and until they actually take time off and the worker is in control of the amount they have, simple.

Remember that one temping agency challenged the EU rulings on rolled up holiday pay and lost.

Payrollpro

jenny3549

Thanks PP! It's always good to get confirmation. I told her that I was not going to pay the holiday pay weekly as I have my own system, it's just difficult sometimes when someone is convinced their way is right just because they have been doing it like that for years.

I don't presume to tell her how to deal with her own payroll for her agency (her company is not part of a group with ours) but she is a director of our company also which means we have had a few disagreements over payroll and HR related things over the years! Of course, the MD (her husband) refers to her as 'an expert' in these things. I'm just a stubborn so and so though so I tend to do it my way anyway!

coojee

payrollpro wrote: »

Jenny,

The problem with that argument is that it was just such practices within the recruitment industry which prompted the EU driective in the first place!

One method I like, which some agencies do, is to work out the value of the holiday each week but instead of paying it, it shows on the payslip as accumulated holiday entitlement and the worker then calls off whatever amount they want when they take a holiday. It satisfies the law as no payment is made unless and until they actually take time off and the worker is in control of the amount they have, simple.

Remember that one temping agency challenged the EU rulings on rolled up holiday pay and lost.

Payrollpro

I like this one, hadn't thought of that. I get rolled up holiday pay, it doesn't bother me that I don't get paid when I don't work. WHat would bother me is if I had to be paid on the system of average hours worked in the 3 months before the holiday was taken, if those 3 months just happened to be very light then I wouldn't get as much holiday pay. Conversely the downside for the employer is if those 3 months happened to be very heavy I'd get a disproportionately high amount of holiday pay. I can see why the EU don't like it though, I hardly ever take 4 and a bit weeks holiday because I don't need to. I set my own hours so if I'm off for a couple of days I don't even count it as holiday as some days I don't work anyway.

Monsoon

Surely someone on a fixed salary effectively gets rolled up holiday? They get paid the same every month whether they work or not.

JodieR

Monsoon wrote: »

Surely someone on a fixed salary effectively gets rolled up holiday? They get paid the same every month whether they work or not.

No no, they get the opposite - if it was rolled up they would get more when they were actaully in the office and less over xmas and the summer when they're having a couple of weeks off (ie the time you need your money most!), hence the argument!