The Government has made further amendments to its guidance on rolled up holiday pay. This is the third time that the guidance has been amended since the European Court of Justice decision in Robinson-Steele v P D Retail Services in March 2006. In that case the European Court of Justice held:

  • That it was contrary to the Working Time Directive (“WTD”) for a payment for statutory annual leave to be made in the form of part payment staggered over the corresponding annual period of work and paid together with remuneration for work done, rather than in the form of a payment in respect of a specific period during which the worker actually takes leave.
  • Member states must take appropriate measures to ensure that the practicalities that are incompatible with the WTD are not continued.
  • Sums already paid to a worker under a rolled up holiday pay scheme could be set off against the holiday pay due to the worker, provided the arrangements are sufficiently transparent and comprehensible and the sums represent an addition to pay for work done.

At the time that the decision was issued there was a debate as to whether the third point referred to payments made under a rolled up holiday pay scheme up to that point could be off set or whether such setting off could continue in the future. The Government issued guidance at the time to say that rolled up holiday pay was unlawful and employers should renegotiate contracts involving rolled up holiday pay for existing employees/workers as soon as possible. The guidance then went on to repeat the third point of the judgment. It was argued at the time that the guidance did not amount to appropriate measures to ensure that rolled up holiday pay arrangements were discontinued, as required by the second limb of the judgment.

In March 2007 the guidance was amended to state the following:

“Following an ECJ judgment on the 16 March 2006, rolled up holiday pay is considered unlawful and employers are now required to ensure that the payment for statutory annual leave is made at the time when leave is taken.”

Such guidance was issued on a presumption that after a year employers should have replaced any existing rolled up holiday pay arrangements.

The Government has now made further amendments to its guidance and it now states: