When employers (or agencies) refer to ‘rolled up’ holiday pay, they normally mean paying an additional sum of money on top of a worker’s hourly rate when they are working, to cover the equivalent of their annual holiday pay.
The courts have ruled that rolled up holiday pay is unlawful, as it is a disincentive for workers to take their holidays. This is because the worker is not paid when they are actually on holiday but receives a higher rate of pay when they are working. The statutory minimum holiday entitlement (currently 5.6 weeks in the UK) is there for health and safety reasons, as workers need time away from work to rest.
The ruling stated that Rolled up holiday pay as being unlawful, as the holiday pay should be paid when a worker is actually taking their holiday. Having said that, where rolled up holiday payments are made and are clearly identified on a worker’s pay slip as holiday pay, those payments would be offset against any holiday pay claim.
Employers have an obligation to ensure that workers are taking at least the minimum statutory holiday and, if this is not happening, the Health and Safety Executive can take action.