Rolled Up Holiday Pay: What YOU Need to Know

An intriguing concern that has been brought to light involves the practice of ‘rolled up holiday pay’. This system, which was officially ruled out in 2006, entails including an employee’s holiday pay within their standard hourly wage instead of providing it separately. Despite its prohibition, it is observed sporadically within the security industry. Jobs posted on social media platforms often advertise hourly rates that suspiciously align with the combined total of standard pay and holiday pay. This raises questions about the fair treatment of workers’ rights and compensation within the industry. It is crucial to scrutinize such practices to ensure that employees are not being deprived of their entitled benefits.

Implication for Workers with Irregular Hours

Workers with irregular hours like those that work in the security industry, are significantly more susceptible to the rolled up holiday pay practice. This group includes casual workers, agency workers, or those on zero-hour contracts, whose hours of work are uncertain or vary considerably from week to week. These variable working hours often make it easier for employers to implement rolled up holiday pay, as it simplifies managing complex payroll calculations.

What is Rolled-Up Holiday Pay?

The term ‘rolled up holiday pay‘ refers to employees of a company regularly being given money which is referred to as ‘holiday pay’ despite their not having taken any time off. The practice can become an issue when the employee takes time off but does not receive holiday pay during this time.

The practice of rolled up holiday pay originated to ensure that short-term and casual workers were still being adequately compensated, even if they were not taking (or were not able to take) any time off whilst employed by their respective company(s).

However, the practice has been shown to discourage workers from taking adequate rest time, principally because their holiday pay has already gone towards other expenses (a salient concern in these times of record inflation), and employees thus feel that they cannot afford any time off. If an employee has been unable to save up their rolled up holiday pay, illnesses, bereavements, or even vacations can potentially become financially ruinous, or even impossible.

A lot of security operatives are employed as casual workers, temporary workers, sub-contractors (or even ‘sub-sub-contractors’), meaning that the practice of offering rolled up holiday pay is sadly not uncommon in the UK security industry. Here’s what you need to know.

The History of Rolled Up Holiday Pay

The Working Time Regulations 1998 changed workplaces across the UK. By stipulating that UK-based workers had the legal entitlement to a certain amount of paid annual leave (proportionate to the number of hours worked), this directive standardised holiday pay at a time when such a measure was sorely needed.

Prior to this legislation coming into effect, there was no true standard for paid holiday entitlement, meaning that the amount of paid leave allotted would vary significantly from contract-to-contract, business-to-business, and industry-to-industry.

The new legislation was a definite improvement for workers who met the criteria to be classed as ‘full-time’ or ‘part-time’ employees in the UK. But what of those who were not employed on a full or part-time basis: the casual, temporary, freelance, relief staff, self-employed, sub-contractors, and more?

Availability of work was – and still is – not guaranteed in many sectors. Professionals who work in areas such as construction, retail, factory work and security often find that their hours are unreliable. Sometimes they work a lot, other times they work less frequently.

It was in response to situations such as these that the practice of offering rolled up holiday pay began in earnest. Employers were legally obligated to offer paid leave to their employees, but said leave was not possible in all cases, hence the proliferation of rolled up holiday pay as a viable solution.

Today, we understand that regular rest periods and good health are inextricably linked. Rest improves mental health, strengthens the immune system, and aids concentration, all of which increases job performance overall. In effect, employers who would allow their staff inadequate rest are effectively stealing from themselves. A healthy ‘work-rest balance’ (something yet to be achieved by most of us, regrettably) is therefore vital for employees and companies that wish to remain competitive.

It is therefore incumbent upon employers to ensure that not only is paid leave provided, but also that it is taken.

In 2006, the case of Robinson-Steel Vs. PD Retail Services was finally resolved by the European Court of Justice, and the practice of offering rolled up holiday pay was deemed to be unlawful.

As a result of this ruling, all holiday pay in the UK is to be paid to the employee at the time their leave is taken, and at no other time. To do otherwise amounts to a violation of the law. All contracts that contained provisions for rolled up holiday pay were therefore ordered to be renegotiated as a result of the ruling.

Under the terms of the ruling, any ‘rolled up’ payments that had already been made prior to the ruling taking effect could not be claimed again by employees. Only additional holiday pay that was already owed to the employee could be claimed.

Today, despite the practice being effectively outlawed, some employers still offer rolled up holiday pay. Any UK-based employer is legally obligated to pay their workers the correct amount (from national minimum wage upwards) as agreed upon with the employee – and this includes holiday pay. As a result, there should always be enough funds for the employer to meet their obligation to their employees.

One reason that rolled up holiday pay still exists as a practice in the UK is that it can be difficult to calculate, or allocate, holiday pay to employees who only work infrequently for the company, or work on a temporary basis (covering shifts, etc). Such employees are legally entitled to money from the company, yet this money must be paid only when holiday is taken. Many employers find it easier to simply give them the money as part of their regular pay packet. However, this practice is in violation of the law.

Holiday Pay Entitlement

According to the UK government, workers are entitled to a week’s pay for each week of statutory (legitimate and authorised) leave taken by them. By law, a full-time employee is entitled to 5.6 weeks’ (28 days) paid holiday per year. This may or may not include bank holidays (it differs depending on the employer).

28 days is the maximum holiday pay to which an employee is entitled. This includes those who work more than 5 days a week, or longer hours than those considered ‘full time’. Some employees are granted extra paid holidays in addition to this. This is called ‘enhanced’ or ‘contractual’ holiday entitlement and is awarded at the discretion of the employer. Holiday pay can take the form of partial days (such as late starts or early finishes), extended vacations, necessary days off, or anything in between.

According to Acas.org, “To work out what your holiday entitlement is in days, multiply the number of days you work each week by 5.6. If you work 5 days a week, your statutory paid holiday is 28 days (5 x 5.6) a year”.

In the UK, workers have the right to paid holiday whether they work full time, part time, or under the terms of a ‘zero hours’ contract. The amount of holiday offered depends on the number of days worked, as well as the policies of the employer in question. Holiday pay begins to accumulate as soon as the worker begins their term of employment, and includes probationary periods, maternity, paternity, or adoption leave, or time off due to sickness.

A part-time employee’s holiday pay is determined the same way as a full-time employee’s holiday pay; however, it will be allocated proportionally to the number of hours worked. For example, a 3-day working week will yield 16.8 days, as opposed to 28 days of paid leave per year. If enhanced holiday pay is offered by an employer to their full-time employees, the same deal must legally be offered to their part-time employees as well.

Any worker who operates under the terms of a 12-month contract is still entitled to 5.6 weeks’ holiday pay, even if their shift pattern sees them working fewer hours than a full-time employee (examples may include those who work during academic term time, those on ‘zero hours’ contracts lasting 12 months or more, or those who work irregular shifts). This is because the contract remains in place for an entire year.

Those who are subject to contracts shorter than 12 months will find their holiday pay is subject to the length of the contract, rather than the number of hours worked. For example, a worker on a ‘zero hours’ contract for 6 months is entitled to 2.8 weeks’ holiday pay, even if they only worked for a few days of the contract.

Self-employed workers are not usually entitled to holiday pay unless they are under contract to a different company or organisation than their own.

Those readers who do not meet any of the criteria listed above, or are having difficulty calculating their holiday pay entitlement, can use the government’s holiday pay entitlement calculator to work out exactly how much holiday pay they are owed. 

Is Rolled-Up Holiday Pay Illegal?

Officially, the practice of offering rolled up holiday pay is illegal. However, it is unlikely that those employers who still offer rolled up holiday payments will be convicted of committing any crime. Functionally, the practice of offering ‘rolled-up’ holiday pay remains something of a legal ‘grey area’.

Although the European Court ruled that the practice should be outlawed in 2006, the ruling did little more than urge EU member states to formally pass legislation against the practice. Not all states obliged. The UK has therefore never formally legislated against the practice of rolled up holiday pay beyond the edict issued by the court that any contract that offers rolled up holiday payments be formally re-drawn and/or renegotiated.

This, coupled with Britain’s recent departure from the European Union renders the decision legally-binding, but likely not very enforceable, as no specific law can be considered to have been broken by the continuation of the practice. Most employers would probably be amenable to ending the practice, if formally asked to do so (if only to avoid potential legal headaches). Still, the issue seems unlikely to gain much traction in courts.

In our view, giving an employee extra money in lieu of legally and medically required rest time is not an ethical practice. As the 2006 court case conclusively proved, the practice of offering rolled up holiday pay discourages workers from taking much-needed days and weeks off and, in many cases, can make situations such as bereavements, medical emergencies and necessary treatments cost-prohibitive.

At the time of writing, the UK is experiencing a deep and worsening financial crisis, with inflation driving up the cost of living to unprecedented levels. Working families are finding it harder and harder to keep food on their tables, and many are burning through their savings and wages just to stay afloat. In such times, many workers receiving rolled up holiday payments will find that they simply cannot afford to be sick, to take a rest, to tend to sick or dying relatives, or to do anything besides work until they, themselves, burn out and experience the myriad issues caused by stress and exhaustion.

For this, and many other reasons, we at WTD urge security companies (as well as those companies that employ security professionals) to end the practice of rolled up holiday pay wherever possible and abide by the 2006 ruling. It’s fairer, safer, and better for everyone.