On March 16, the European Court published its judgment in the latest "rolling up" case. The practice of rolling up holiday pay - in which the employer pays an enhancement to the employee's hourly rate of pay and then makes no payment during holiday absences themselves - has been controversial and, over the past few years, has been declared legal, illegal and then legal again by various courts. The European Court, which has the last word on such matters, has now confirmed the position.

On the face of it, the Court, said rolling up is not allowed. This, according to Brendan Barber, of the Trades Union Congress, "should make it more difficult for rogue bosses and employment agencies to cheat staff out of their holiday pay".

But a closer examination of the court's judgment reveals that all may not be as simple as that. It all depends on how transparent the holiday pay element of the rolled-up wage actually is.

If, along with the normal basic pay, there is a separate additional payment, which is easily identifiable as holiday pay, then the employer can, come holiday time, set that payment off against the holiday pay due to the employee while he is away. In this way, the position is akin to the practice of dismissing without notice and making a payment in lieu of notice - while technically wrong, there is little employees can do about it as long as they get their money.

The effect of this is essentially to preserve the status quo. Employers who roll up can continue to do so, as long as their holiday pay is a genuine addition to the basic wage and is shown as such, for example, on the employee's payslip.

It is easy to forget that the right to paid holiday began life as part of health and safety law, the aim being to ensure that workers were able to have adequate periods of rest and relaxation away from work.

The practice of rolling up is almost certainly contrary to that, as it discourages employees from taking holiday.

On that basis, the decision is surprising, although it will broadly be welcomed by employers.

* Stephen Elliott is a solicitor in the employment team of North-East law firm Ward Hadaway. He can be contacted on 0191-204 4000 or by email at stephen.elliott@wardhadaway.com

Published: 28/03/2006