Rolled up holiday pay set to return: what exactly is it?

  • Leave and Absence
a jar of coins labelled holiday
Peninsula Logo

Peninsula Group, HR and Health & Safety Experts

(Last updated )

Rolled up holiday pay has been unlawful since 2006 but is set to make a comeback. Those who begun their careers in HR or payroll before then will need to dust off the old guidance and re-familiarise.

What is rolled up holiday pay?

Workers are entitled to a minimum amount of paid annual leave per leave year. When employers pay rolled up holiday pay (RUHP), they pay a worker for their holiday while they are actually working, instead of when they are actually on leave. They do this by adding an extra percentage of pay onto their workers’ basic pay, calling it “rolled-up holiday pay entitlement”. The percentage added on is directly related to the amount of annual leave the worker is entitled to, achieved by carrying out a specific calculation: 5.6 (weeks of statutory annual leave) divided by 46.4 (weeks that are worked in a year if someone takes 5.6 weeks’ leave (52 – 5.6)) multiplied by 100.   If the worker gets the statutory minimum annual leave entitlement of 5.6 weeks, the percentage to add on is 12.07%. Therefore, if the worker receives £10 per hour, their actual gross pay will be £11.21. If the worker gets more than the statutory minimum annual leave, the calculation would change. For example, if a worker gets 6 weeks leave per year, the 5.6 in the calculation above is replaced with 6. When a worker takes leave, they do not get paid.

Why is it unlawful?

Several cases dealt with the lawfulness or otherwise of RUHP including Caulfield and others v Marshalls Clay Products Ltd, Clarke v Frank Staddon Ltd [2004] IRLR 564 and MPB Structures Ltd v Munro [2003] IRLR 350. Eventually, this matter was referred to the European Court of Justice (ECJ) in Robinson-Steele v RD Retail Services Ltd and others [2006] IRLR 386.

The ECJ ruled RUHP to be unlawful, unless it had already been paid to the worker under a rolled-up scheme that was transparent and the sums associated were an addition to pay for the work done. This led to updated guidance from the Government to say that RUHP is considered to be unlawful and that pay should be paid at the same time as the leave.

Why is it coming back?

According to the Taylor Review of Modern Working Practices, RUHP has significant benefits for some workers, particularly in casual working arrangements or the gig economy. It was argued in that report that the use of RUHP gave greater choice to employees and allowed them to be paid in “real time”, rather than at a later time when they are not working. However, it did note that additional safeguards would be needed to ensure individuals didn’t simply work for 52 weeks of the year in order to earn more money.

The other benefit identified by the Government of RUHP is the “potential simplicity” of it. It would be a very straightforward calculation, it argues, and it means it is done throughout the year with every payslip. This will be an extremely important element; making sure that the pay slip identifies that RUHP is paid and sets out the amounts transparently.

For answers to your questions on rolled up holiday pay, visit BrAInbox today where you can find answers to questions like Can I pay rolled up holiday pay?

Read more from the latest BrAInbox Business News update:

UK gender pay gap falls at fastest pace since 2017

Asbestos conman ordered to pay back £82,100

HMRC advisory fuel rates for company car users from 1 June 2023

Q&A: company credit cards and EV charging

Related articles

  • A woman confidently poses - caption above her says 'Ask Kate'


    Ask Kate: my employee’s unmotivated after their holiday. Help!

    This caller was worried about their employee struggling with the post-holiday blues. So, they asked Kate Palmer, Peninsula’s HR Advice and Consultancy Director, for expert advice...

    Kate PalmerHR Advice and Consultancy Director
    • Performance & Appraisals
  • man and woman shaking hands


    The employer’s guide to onboarding a graduate

    One in four graduate employees quit in their first two months on the job, according to the Telegraph. To help improve the likelihood of your graduates succeeding and progressing in your company, here are some important tips…

    Kate PalmerHR Advice and Consultancy Director
    • Recruitment
  • ill person lying on sofa blowing nose


    The five-step process for managing staff sickness

    ACAS recently updated its guidance around managing sickness absences at work. So, now is a good time to make sure you’re doing everything you can to help manage sickness in your workplace.

    Gavin Scarr HallDirector of Health and Safety
    • Leave and Absence
Back to resource hub

Try Brainbox for free today

When AI meets 40 years of Peninsula expertise... you get instant, expert answers to your HR and health & safety questions

Sign up to our newsletter

Get the latest news & tips that matter most to your business in our monthly newsletter.

International sites

© 2023 Peninsula Business Services Limited. Registered Office: The Peninsula, Victoria Place, Manchester, M4 4FB. Registered in England and Wales No: 1702759. Peninsula Business Services Limited is authorised and regulated by the Financial Conduct Authority for the sale of non-investment insurance contracts.

ISO 27001 and 9001 accredited company.
The Sunday Times - Top Track 250.
Glassdoor 2018 Best Places To Work.