So finally we have a judgement from the European Court of Justice (ECJ) that is supposed to clarify the issue of rolled-up holiday pay. 'Rolling-up' holiday pay means that employees are currently paid an extra amount to cover holiday pay for each week that they work, and then receive no pay for weeks when they are on holiday.

This type of arrangement can be attractive to employers who employ most of their staff on short-term contracts as it creates an incentive for employees to avoid taking leave during their employment/

Employers can also avoid having to manage the absences that result through leave.

Up until now the law has not been very clear about whether this practice is actually allowed unless you live in Scotland where it has been deemed illegal.

But does the ruling actually make it any clearer now?

Many commentators are heralding this latest judgement as preventing rolled-up holiday pay - but this is quite simply not the case.

Essentially, the ECJ has ruled that rolled-up holiday pay is, unlawful. However, if the holiday pay element of the rolled-up payments is sufficiently transparent, the employer can set off those payments against money due for the specific period when leave is actually taken. So it actually makes little difference in practice.

The ECJ ruled that employers cannot simply allocate part of an existing wage packet to holiday pay - it must be additional payment to that made in respect of work actually done.

Employers must pay holiday pay during the specific period during which the worker takes leave - it is unlawful to stagger this payment over the year. Clear so far.

But the ECJ goes on to say that if the employer does roll-up extra money in respect of holiday pay, it can set-off the extra money already paid against the payments it ought to make during the specific holiday period.

The burden is on the employer to prove the transparency of the payment.

What a fuss about nothing. In 2004 the Court of Appeal stated that rolled-up holiday pay is lawful as long as the rolled-up element is transparently set out for example on payslips and is a genuine payment in respect of holiday. The ECJ has now said that it's technically unlawful, but that as long as it's transparently set out and a genuine payment in respect of holidays, the payments can be set-off.

So in short, nothing has really changed. The situation is still about as clear as mud and after all this time this ruling will have almost no practical impact on existing UK law and practice.

Contributor:Clare Waller, partner at Hawkins Russell Jones, Hitchin