Editor's comment: Rolling the dice on holiday pay

Editor's comment: Rolling the dice on holiday pay

Rolled-up holiday pay has never been an easy issue to get to grips with. And this week, it seems that even after a European Court of Justice (ECJ) ruling, it remains about as clear as mud for anyone in the construction industry.

The ECJ ruling in itself seems straightforward: that it is unlawful to roll up holiday pay because it must be paid "in respect of a specific period which the worker actually takes as leave". This was in direct conflict with the advocate general's opinion that it was lawful, provided certain criteria were met.

All seemingly clear, until you read more deeply into the report, in which the ECJ also says that the legislation doesn't "preclude sums paid transparently and comprehensibly to a rolling up arrangement from being set off against the obligation to pay holiday for specific leave taken by the worker". Which leaves everyone wondering where they stand, apart from the GMB union, which took the case to the ECJ and is cock-a-hoop at the judgement’s 'unlawful' outcome.

For many workers, it is a welcome move, but it could have a sting in the tail for construction, where the issue is further complicated by the new Construction Industry Scheme tax regime which will come into force in April 2007.

With HM Revenue and Customs (HMRC) taking a keen interest in whether construction workers are self-employed or employed, any decision taken by firms which currently engage those workers could have a big knock-on effect.

Under the circumstances, getting holiday pay right is tricky. At such a crucial time for self-employed people in the construction industry, there's little doubt that the only way ahead is to stick rigidly with HMRC regulations. Get it wrong and it could be a long-term penalty for many in construction.

Emma Penny, Editor, Contract Journal, 22 March 2006