The Working Time Regulations ("WTR") were introduced in the UK in 1998 to implement the EU Working Time Directive 93/104/EC ("the Directive") and are intended to be a health and safety measure. Under the Regulations, workers are entitled to four weeks paid annual leave. One of the most controversial questions with regard to the right to receive four weeks paid annual leave under the Working Time Regulations is whether and in what precise circumstances, "rolled up" holiday pay arrangements are permissible. This is a system whereby employers pay an additional amount representing holiday pay into the normal salary/wages paid to workers. When the worker then takes annual leave, he does not receive any pay. The worker receives this enhanced hourly rate (typically, this is represented by an 8 to 9% addition to hourly or daily remuneration) to compensate for the fact that he will not be paid holiday pay when annual leave is actually taken.
[...] The holiday pay must be additional to any remuneration in respect of work done and should be paid during the specific period of leave. Concerning payments already maid to workers through the system of “rolled- up holiday the Court decided that payments made transparently and comprehensibly, may be set off against the payment for specific leave. Nevertheless set-off is excluded where there is no transparency or comprehensibly. The burden of proof is on the employer to prove the transparency of the payment. [...]
[...] He was then on holiday until July and went back to work with the company but he was not paid between June and July because his contracts stipulated that: Holiday and Bank Holiday pay is included within the daily rate.” Mr Clarke made a claim for the payment of the annual leave, which he had accrued during the period from April to November 2001. The Employment Tribunal dismissed that application and Mr Clarke appealed against that decision to the Employment Appeal Tribunal. [...]
[...] The contract under which he carried out work contained a provision that on top of his normal hourly rate he would receive a further per cent, which was pay in respect of his entitlement, to payment for his annual leave entitlement? When his contract was ended he made a claim for holiday payments. He alleged these holiday payments were due under the Working time Regulation. These payments amounted to two-and-a-half week's salary for untaken leave. The Leeds Employment Tribunal considered the case. [...]
[...] Moreover, when using this method, employers avoid the requirement of calculating the holiday pay due to each worker for each period of leave, a notoriously difficult exercise and seen by many as an excessive drain on administrative resources. So, although the practice of rolled up holiday pay has been prevalent, cases have been brought on the basis that such arrangements do not accord with the Directive from which WTR derive. The English and Scottish courts differed in their view as to whether or not ‘rolled-up' holiday pay discharged an employer's duty to pay for holidays. [...]
[...] ECJ makes clear that any sums already paid up to the date of this judgment on a rolled-up basis will be able to be set off against any holiday pay that may be due to the worker. This is, though, only the case if the rolled-up holiday pay element was a genuine and additional payment to cover holidays over and above the worker's normal rate and was paid “transparently and comprehensibly”; otherwise the employer may end up pay twice a worker for holiday. [...]
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