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Is rolled up holiday pay allowed or not?

Rolled holiday pay for casual workers - Government and ACAS guidance says no but is this correct?

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Hi,

I know that it was common practice for employers to uplift the hourly pay of zero hours/casual workers by 12.07% to include holiday pay. I am aware that the ECJ ruled that this is now unlawful under the Working Time Directive, however I have read reports that is it is still allowable as long as it is done transparantly and shown on the payslip.  Gov.uk and Acas say that rolled up holiday pay is not allowed, however from experience I am know that what is published on government websites is not always consistent with the law. 

Does anyone have clarification on whether or not rolled up holiday pay can be paid to casual workers? 

Thanks

DP

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26th Jun 2019 15:41

It's not allowed. The idea is that people have paid time on holiday, not that they get paid 12.07% above minimum hourly rate.

Having said that, there's a lot of people - particularly agencies - still doing it. It's hard to stop because workers are reluctant to complain and, anyway, HMRC are policing it.

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to lionofludesch
26th Jun 2019 15:55

Thanks, I thought as much but I am always cautious when the government publish guidance that hasn't been written in legislation, however the recent case in the ECJ should be a precedent.

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26th Jun 2019 15:50

I think it is pretty much unenforceable for workers who don't have regular patterns. How would you tell the difference between some one who works 8 hours on Monday and gets rolled up holiday pay, and someone who works 8 hours on Monday and take s holiday between 9 and 10am on Tuesday...

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to WhichTyler
26th Jun 2019 16:04

Yep - that's the assertion employers make.

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to lionofludesch
26th Jun 2019 16:06

What would be a better solution?

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to WhichTyler
26th Jun 2019 16:13

A better solution would be to pay holiday pay as it was intended, within the spirit of the legislation, but that seems to be too much to ask of these employment agencies.

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to lionofludesch
26th Jun 2019 16:45

I'm an employer and pay holiday pay where we have people on regular hours. But if someone works for two weeks on an event or project, and may or may not be coming back in future, do you suggest that they write to request a day off so that we can give them holiday pay? Or should we only pay when they tell us they are not going to come back at all

You may think that this pattern of employment shouldn't be allowed and we should only engage on long term contracts but that's another question...

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to lionofludesch
26th Jun 2019 16:49

Serious question: do you ever have casual staff in your practice? If so, how do you handle this?

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to WhichTyler
27th Jun 2019 09:41

WhichTyler wrote:

Serious question: do you ever have casual staff in your practice? If so, how do you handle this?

The answer to both your posts is that holiday pay should be paid when the employee wants to receive it, not when the employer wants to pay it.

I don't see what's unreasonable about that.

There's no requirement to put in a written request, whether or not it's considered good practice.

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26th Jun 2019 16:16

I believe the most common solution is that when a casual worker takes leave, they are paid 12.07% holiday pay based on their average earnings over the last 12 weeks. So if someone takes a week's holiday and are entitled to be paid for it, the pay would be calculated based on the average pay in the 12 week period.
I believe the basis period will move to 52 weeks from next year, to even out seasonal variances, however it is often difficult to separate advised best practice and actual legislation, hence why I posted my question.

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By NDH
to DP Walsh
26th Jun 2019 16:22

I assumed the most common solution was to accrue holiday pay each time the employee is paid at 12.07% (or 12.08% if you're a bit more cautious) and then pay holiday pay out of this balance when they take holiday.

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to NDH
26th Jun 2019 16:29

Yep - I've got a client who does this. She chips 12.07% into a holiday pay fund on which the employees are free to draw at the rate of 5 hours pay for each day's holiday they book.

Five hours is roughly the average day's work for these employees. Hours are irregular, though the variation isn't particularly seasonal.

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26th Jun 2019 18:43

Schools/Preschools/Nurseries where the staff work term-time only often receive their holiday pay as part of their wages as they're not permitted to take holiday during the 39 working weeks of term. In order for this to be lawful, the employment must be explicit in showing the amount they receive as wages Vs the amount they're receiving as holiday pay and must specify that they are expected to take their 'holiday' during the 13 weeks where they're not 'at school'.

Their monthly payslip doesn't have to show the split between wages and holiday pay, providing the above conditions have been met.

I've spent a lot of time talking to lawyers about this (work as business manager in a preschool) and this doesn't fall foul of the Working Time Directive. This is because it's completely transparent to the employee, and they're not given an hourly rate which includes the holiday element.

Not sure if that's helpful to you.

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27th Jun 2019 09:32

My understanding is that rolled up holiday pay is frowned upon by the likes of the EU and ACAS. As far as I am aware there have been no test cases to fall back to for clarification and therefore the waters are untested so to speak. You will not want to be the one caught up in a test case so I guess that's the added risk!

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27th Jun 2019 12:49

Every organisation I've worked for with a substantial (100+) casual workforce tends to operate via an accrued 12.07% paid on a regular basis - typically monthly or quarterly. Payslips separate this payment from hours paid, contracts highlight this method, unions agree to the terms.

While I appreciate lion's point that holiday pay should be paid "when the employee wants to receive it", the administrative burden of operating such a system for any casual-heavy business is enormous, and unless the bulk of the workforce is demanding such a change I don't see many businesses diverting admin time into managing the process..

From personal experience (and perhaps this speaks to communication failures on my end) I also found that, when following the process described in law, my employees were *less* certain about how much holiday they had accrued and at what rate it would be paid than they were under a scheme based on quarterly payouts.

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to Cactuscat
27th Jun 2019 16:52

Cactuscat wrote:

While I appreciate lion's point that holiday pay should be paid "when the employee wants to receive it", the administrative burden of operating such a system for any casual-heavy business is enormous, and unless the bulk of the workforce is demanding such a change I don't see many businesses diverting admin time into managing the process..

Yes - they're lazy. They're using a process which suits them with no regard for the employee.

The unions are so weak that they doff their cap at the employers - "Thank you, your lordship, good of you to pay the holiday pay at all, your lordship."

Thanks for confirming my point.

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to lionofludesch
27th Jun 2019 18:29

The only time I think it becomes arguably onerous - and, indeed, the situation I've had personal experience running - is when employees have neither set working pattern nor wages, such as servers in a restaurant.

In that case taking a holiday a few weeks earlier or later can radically change the rate at which the holiday is paid - a midsummer holiday "earns" less than a September holiday, once the 14 weeks of June-August tip averages are accounted for. Can be tricky to justify to those impacted, and even harder to explain if English isn't their first language.

On the whole, however, you're right; I'd find it hard to claim with a straight face that this practice is somehow different from simply upping the hourly rate by 12.07%.

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By Matrix
27th Jun 2019 20:34

I add the holiday pay monthly for one employee for one client. I don’t really understand why it is an issue, there are no contracts and no one to track holiday. I don’t offer this service.

There are others on the payroll where I think they are owed years of holiday but they won’t put it through, luckily they agreed to do it for the new person after I got formal advice for them and I was told to add the holiday pay,I wasn’t told it has to be taken.

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