Agencies and their clients may face claims for backdated holiday pay if the European Court of Justice overturns the current interpretation of the Working Time Directive.

At present, firms in England are allowed to pay temporary workers holiday pay ‘rolled-up’ as part of their pay packet, and temps are expected to set a portion aside for when they do take a holiday, either during or after their contract has ended.

However, this practice is illegal in Scotland, after a ruling by the Scottish Court of Session set a legal precedent last year.

A recent case at a Leeds employment tribunal – Robinson-Steele vs RD Services – has now been referred to the European court of justice after failing to reach a decision on whether a percentage of the complainant’s salary constituted holiday pay.

If the court decides this is not the case – so making the practice of rolled-up holiday pay illegal – then agencies could find themselves forced to backpay temporary workers, according to Paula Rome, training and development solicitor at Lewis Silkin.

“Agencies will want to pass on this cost to the client, which will make temporary workers more costly. It will also mean they have to review their terms and conditions, which is a huge undertaking,” she said.