Opinion of the Advocate General — ECLI:EU:C:2005:650
Date: 2005-10-27
Language of the case: English
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Social Policy
Procedure: Reference for a preliminary ruling
Origin: United Kingdom

summary, then, the national court and tribunal both essentially seek by their first questions (12) to know whether the entitlement to paid annual leave under Article 7 of the Directive precludes in principle agreements for rolled-up holiday pay. To answer that question, the content and extent of the entitlement to paid annual leave under Article 7 of the Directive should be examined first. A further stage will be to consider to what extent private contractual agreements may run counter to that entitlement. B – Paid annual leave under Article 7 of Directive 93/104 1. Subject-matter of the entitlement to paid annual leave a) Wording and scheme of Article 7(1) of the Directive 46. Article 7(1) of the Directive guarantees the worker’s unconditional entitlement to four weeks’ paid annual leave. The Court has already recognised this in its judgment of 26 June 2001 in BECTU, (13) in which it held that ‘Article 7(1) of Directive 93/104 imposes a clear and precise obligation on Member States to achieve a specific result’ (14) and that this is an ‘individual right’ (15) of the worker. (16) 47. Beyond this recognition of an entitlement in principle, the wording of Article 7(1) of the Directive contains only little indication of how the employer’s corresponding obligations are to be fulfilled. With respect to the ‘conditions for entitlement ... and granting’, there is merely a reference to ‘national legislation and/or practice’. 48. It follows from the wording of Article 7(1) of the Directive that the employee is entitled to ‘actual rest’ (17) during which he continues to be paid. (18) However, it is left open what principles are to be used for remuneration of the period of leave. From this point of view, it is open whether a corresponding payment must be made during the leave, or whether it may be made in advance or afterwards. It might even be concluded from the reference to national laws and/or practice that the Directive leaves it as far as possible to the Member States to fill in the gap in the legislation. 49. With respect to the scheme, it must then be observed that the Directive does not contain any further provisions that address the point in question. Moreover, Article 15 of the Directive permits generally the application or introduction of national rules that are more favourable to the protection of the safety and health of workers. Article 17 provides, however, that the Member States or the two sides of industry may derogate only from certain exhaustively listed provisions of the Directive under certain conditions. Article 7 of the Directive is not one of the provisions in respect of which the Directive expressly allows a derogation, however, as the Court already said in BECTU. (19) b) Spirit and purpose of minimum annual leave 50. The Court also already had occasion in the BECTU judgment (20) to consider the ratio legis of Article 7(1) of the Directive. 51. The aim of the Directive is to lay down minimum requirements intended to improve the living and working conditions of workers through approximation of national provisions, in particular on working time. (21) The Court deduces this, first, from the legal basis of the Directive – Article 138 EC (formerly Article 118a of the EC Treaty), which aims at improved protection of the safety and health of workers – and, second, from the wording of the first, fourth, seventh and eighth recitals in the preamble to the Directive and the wording of Article 1(1). 52. According to those provisions, Community-wide harmonisation of the organisation of working time is to ensure better protection of the safety and health of workers by guaranteeing minimum rest periods and adequate breaks. (22) 53. But for increased protection of the safety and health of workers actually to be achieved, it is necessary that the worker is actually granted the rest periods prescribed, and hence also annual leave. (23) For that reason Article 7(2) of the Directive prohibits replacing the minimum annual leave by a money payment, except where the employment relationship is terminated. 54. Effective grant of the entitlement to leave thus also means that the worker is put in a position actually to take the leave that is due to him and is not, for example, deterred from doing so by factual pressures. That is the purpose of the continuation of pay during the leave, in other words, the guarantee of minimum paid annual leave. 55. Consequently, with the entitlement to minimum paid annual leave under Article 7 of the Directive, what is in the foreground is not so much the payment for the periods concerned as the effective possibility of taking the leave in question. In the light of the main proceedings – and their differing facts – it must now be examined how far the methods of remuneration of annual leave at issue affect this effective possibility of taking leave. 2. To what extent might the entitlement to paid annual leave under Article 7 of the Directive preclude ‘rolled-up holiday pay’? a) Essential submissions of the parties i) Observations of the applicants in the main proceedings 56. Mr Robinson-Steele did not submit any observations to the Court in Case C‑131/04. 57. The applicants in the main proceedings in Case C‑257/04 take the view that Article 7 of the Directive requires payment to take place in the period in which the worker would have been paid if he had continued to work. If payment does not take place within that period, then there is either a payment in lieu contrary to Article 7(2) of the Directive or a mechanism which entails obstructions or restrictions on taking leave and is prohibited for that reason. In particular, the ‘rolled-up holiday pay’ system discourages workers from taking their annual leave. Since a worker earns more if he works every week, this is a substantial incitement for low-paid workers in particular not to take any leave. 58. The need to ‘save up’ pay for one’s annual holiday is also a deterrent to taking leave in the earlier part of the year. 59. Moreover, it is unlikely, especially in the case of low-paid workers, that the sums paid each week as holiday pay will be saved and not spent. That results in it being financially impossible to take leave, especially if the period worked in the year concerned has not yet been long enough. ii) Observations of the respondents in the main proceedings 60. The respondents in the main proceedings, R.D. Retail Services (Case C‑31/04) and Marshalls Clay Products and Frank Staddon (Case C‑257/04), take the view that it is not contrary to the Directive to pay annual holiday pay in instalments together with the basic pay, if this integrated payment has been contractually agreed. They observe that Article 7 of the Directive gives an absolute and unconditional right only to a minimum of four weeks’ paid holiday. Neither the wording nor the purpose of Article 7, however, requires payment for annual leave to be made in a particular manner or at a particular time. The ‘conditions for entitlement to, and granting of,’ leave are, under Article 7(1) of the Directive, left to national law. Provided that national law does not effectively prevent the exercise of the right, it is in harmony with the requirements of Community law. 61. Moreover, the protection conferred by the Directive must take account of the need to avoid unreasonable administrative, financial and legal obstacles and enable flexibility. As regards the differentiation between the right itself and the conditions of its exercise, which reflects the balance aimed at by the Directive between the protection of the safety and health of workers and the need for flexibility in application, both respondents refer to the Court’s judgment in Case C‑173/99 and Advocate General Tizzano’s Opinion in that case. 62. In any case, a worker cannot be compelled to take leave. The worker can also always decide for himself what he will do during the leave he is entitled to. So he is free to work for another employer during his leave, for instance. That alone cannot be regarded as undermining the rule in Article 7 of the Directive. Moreover, workers are capable of handling their financial resources in such a way that they can cope with the system of integrated payment. iii) Observations of the United Kingdom Government 63. The United Kingdom Government is also of the opinion that a system of rolled-up holiday pay is permissible. In particular, neither the wording nor the purpose of Article 7(1) of the Directive requires payment at a specified time. Rather, the wording of Article 7 of the Directive – as also its preamble – shows by its reference to national law and practice that a certain degree of flexibility in the transposition may be necessary. This is moreover an expression of the principle of subsidiarity. The United Kingdom Government too refers in this connection to the Opinion and judgment in Case C‑173/99. 64. Regulation 16 transposes Article 7 of the Directive adequately by granting workers the requisite period of annual leave and a payment in respect of that period. Provided that national laws and practice do not make the right to paid annual leave illusory, the requirements of Article 7 are satisfied. 65. Nor does the proposed interpretation lead to workers being dissuaded from taking their annual leave. Since the employer cannot impose rolled-up payment unilaterally, and instead an agreement between employer and employee is needed, such an agreement will be possible only if the worker is actually paid and the payment is correctly calculated. 66. An agreement on rolled-up payment has the effect, moreover, that the worker is paid in advance for his annual leave if the leave is taken at a later stage of the period of employment. Workers can be expected to take steps to make sure that the payment of holiday pay in instalments does not discourage them from taking leave. Rolled-up holiday pay is also the fairest and least complicated method in the case of short-term workers whose employment relationship may end before they are able to claim any holiday or payment. There is therefore no reason why Article 7 should require a specific time for payment for annual leave. 67. Moreover, payment at the time when the holiday is taken would – contrary to the preamble to the Directive – lead to considerable administrative difficulties for employers, in particular in the case of casual or temporary workers. Payment in instalments makes it unnecessary to calculate the holiday pay owed in each individual case when leave is taken. Difficulties would also arise often because of the nature of the work if the employee insisted on taking leave during a period of work. iv) Observations of Ireland 68. In Ireland’s written observations in Case C‑257/04 the Chief State Solicitor puts forward the view that it follows from the words ‘paid annual leave’ in Article 7(1) of the Directive that the worker must be paid during or immediately before the leave period. In the system of rolled-up holiday pay, however, he is not paid during his leave. 69. The Directive’s purpose of protecting the health and safety of workers also means that it must be ensured that the worker is not only entitled to leave but can also actually take that leave. Rolled-up holiday pay, by contrast, militates against taking leave, since workers are then required to take leave during which they are not paid, whereas if they work they are paid regularly every week or month. That runs counter to the aims of the Directive, which is intended precisely to prevent workers receiving money instead of their annual holiday. v) Observations of the Commission 70. On the assumption that the continued payment of remuneration during annual leave is a means to an end, not an end in itself, in order to ensure that the minimum period of leave can in fact be taken without financial constraints, an agreement on holiday pay is compatible with the Directive if it ensures that the worker actually enjoys minimum annual leave of four weeks and is paid in relation to that period as if he were working. 71. As the Directive does not prescribe how that aim is to be achieved, it is for the Member States to shape the arrangements for holiday pay. But this must not undermine the fundamental right to annual leave itself. 72. Since, where holiday pay is incorporated into hourly pay, payment takes place regardless of whether the corresponding leave is taken by the worker or not, and there is no measure to ensure that the worker actually takes his four weeks’ holiday, the effect is that the fundamental requirement of ensuring a minimum of four weeks of annual leave is circumvented, contrary to both the wording and the purpose of the Directive. 73. Rolled-up holiday pay may in particular discourage workers from taking leave. Moreover, such a system may lead to abuse on the part of employers who do not want their employees actually to take their leave. 74. The Commission therefore regards the system of rolled-up holiday pay as incompatible with Article 7 of the Directive in so far as it does not also ensure that the minimum four weeks’ annual leave can actually be taken. b) Legal assessment 75. In view of the essential content of Article 7 of the Directive, described above, (24) incorporated holiday pay – such as that in the agreements at issue in the main proceedings – appears in any event to be compatible with the aims of the Directive only if the contractual agreement on which it is based ensures that the worker can actually take the leave he is entitled to. Whether a particular agreement such as the agreements in question on rolled-up holiday pay precludes the effective possibility of taking paid annual leave is something on which ultimately only the national court, taking account of all the circumstances of the individual case – in particular all the contractual documents – can reach a final decision. 76. It will be possible below, therefore, only to examine generally to what extent the agreements in question might appear problematic in connection with making use of the entitlement guaranteed by Article 7 of the Directive, or whether any infringement of the entitlement under Article 7 of the Directive could be justified on grounds of flexibility. i) Rolled-up holiday pay as an obstacle to claiming paid annual leave? 77. In a system of rolled-up holiday pay it is still open in principle to workers to take leave. It is doubtful, however, whether spreading payment in respect of minimum leave over the period of employment does not create pressure in practice which leads to workers not making use of their entitlement to leave. That would not meet the Directive’s aim of effective protection of the safety and health of workers. As the Court has already stated with respect to rest periods, the periods guaranteed by the Directive are intended as far as possible to avert the risk of the safety and health of workers being affected, which could happen with successive periods of work without the necessary intervals. (25) 78. The United Kingdom Government starts from the assumption, in principle correct, that workers are in principle in a position to handle their finances in such a way that the part of their pay which is paid as holiday pay is available to them at the time of taking leave. However, that assumption is based on premisses which appear open to discussion at least. First, it should be observed that freedom of disposition for low-paid workers, which probably in general include temporary and shift workers, does not exist to the same extent as in the case of other workers: low-paid workers will mostly be forced to use most if not all of their pay for subsistence, so that the risk of holiday pay being diverted for other purposes appears inevitable. Also, precisely for such workers with low incomes, the possibility of earning more money by doing more work is a substantial encouragement not to take any leave. If they work continuously instead of taking leave, they not only continue to be paid for the period of leave, they also receive the regular pay for the period in which they additionally work, even though that period (four weeks a year) has already been compensated by the rolled-up holiday pay. As a separate point, it should also be observed that the possibility of ‘personal holiday provision’ postulated by the United Kingdom Government presupposes in any event that the worker is made aware of how much of his remuneration is intended to be used for financing his holiday. In other words, such a financial provision for holidays presupposes transparency of the agreement for rolled-up holiday pay. (26) 79. There are other grounds too for regarding agreements on rolled-up holiday pay as not unproblematic from the point of view of the aims of Article 7(1) of the Directive. That it cannot be left solely to the responsibility of the worker to recognise the remuneration paid to him in respect of his entitlement to leave but not necessarily designated as such and to use it accordingly follows simply from the consideration that the protection of the health and safety of workers is not only in the interest of the individual worker but also in the general interest. It is true that the worker is not obliged to take his leave or use it for recreational purposes. But in the interests of an interpretation in line with the aims of the Directive, it is surely scarcely possible to approve of agreements which are liable to encourage workers to work continuously without taking their minimum leave. (27) That effect, detrimental to the objectives of the Directive, of the agreements on rolled-up holiday pay at issue is no doubt also acknowledged by the United Kingdom Government, when it submits that practical difficulties arise if a temporary worker insists on taking the leave he is due during the period of work instead of at the end of his assignment. 80. It follows from all the above, taking account of the purpose of the entitlement to minimum paid annual leave, that an interpretation in conformity with Community law of national provisions transposing the Directive must be to the effect that private contractual agreements on rolled-up holiday pay can be legally valid only if the effective possibility for the worker of taking minimum annual leave is at the same time ensured in some other way. ii) Examination of the ‘requirement of flexibility’ 81. The Directive itself states, however, in the 17th recital in its preamble, that ‘in view of the question[s] likely to be raised by the organisation of working time within an undertaking, it appears desirable to provide for flexibility in the application of certain provisions … whilst ensuring compliance with the principles of protecting the safety and health of workers’. 82. Once more, the importance must be recalled of the entitlement to paid annual leave, as enshrined in points 8 and 19 of the Community Charter of the Fundamental Social Rights of Workers of 9 December 1989, cited in the fourth recital in the preamble to the Directive. According to the Court’s case-law, that entitlement constitutes a particularly important principle of Community social law. (28) Since the Directive accordingly does not provide for any exceptions to that entitlement, (29) it follows that even something that merely affects that entitlement must be based on serious grounds. 83. A mere reduction of the administrative burden is therefore in any event not a sufficient ground, since that would amount to a justification on economic grounds: that the improvement of the protection of safety and health of workers may not be subject to purely economic considerations follows already from the fifth recital in the preamble to the Directive. (30) The Directive must already have taken account of the effects which the organisation of working time for which it provides may have on small and medium-sized undertakings, in so far as Article 118a of the EC Treaty (now Article 138 EC) as its legal basis makes measures based on that article subject inter alia to the condition that they do not hold back the creation and development of such undertakings. (31) 84. It could, however, be questionable whether the agreements at issue might not be permissible in certain circumstances on serious grounds of practicability. To assess such grounds, however, it is necessary to differentiate between the two forms of organisation of working time concerned in the main proceedings, namely shift working and temporary working. – Shift working by workers employed for an indefinite duration 85. In such a shift-working operation there is a permanent employment relationship. (32) Accordingly, here too it is foreseeable how much leave an employee is entitled to take. The amount to be paid is therefore also certain. On the basis of this regularity – in the case in the main proceedings, four days of work and four days off – it is not evident at first sight why there should be any need for an exception to the principle that pay continues to be paid during leave. 86. In the case of Caulfield and Others v Marshalls Clay, a further doubtful point is that the agreed rolled-up holiday pay is linked to an – also disputed – system of leave in which leave arises only by combining rest periods. Rest periods and periods of leave both serve the purpose of achieving the Directive’s aims of protection of the safety and health of workers, but differ in that rest periods are to be granted on the basis of a separate organisation of working time, and accordingly leave the entitlement to minimum paid annual leave under Article 7(1) of the Directive unaffected. The collective agreement at issue does not appear to distinguish clearly between periods of rest and periods of leave. 87. If, however, the employer can show that the rest periods provided for – by agreement – are calculated in such a way that they also include a proportion of leave, and a longer period of leave is to be taken if appropriate by exchanging working shifts, the (additional) agreement on rolled-up holiday pay appears to be no longer harmful, in so far as – subject to the taking into account by the national court of further circumstances of the individual case – it does not affect the effective possibility of taking the minimum annual leave. – Temporary work 88. In the case of temporary work, by contrast, it is often not foreseeable for what periods a worker will work for the employer in question. The transition from periods of work to periods of non-working therefore resembles a termination of the employment relationship. But in the case of the termination of an employment relationship, Article 7(2) of the Directive even allows the entitlement to leave to be compensated in money. However, instead of calculating the existing entitlement at the end of each period of work, it appears more sensible in fact to provide for continuing payment in instalments, so that the employer always compensates in each case for that part of the entitlement to paid annual leave which the temporary worker has acquired in that employment in the current year. (33) It cannot be ignored, however, that temporary workers have a relatively insecure status in the labour market. A watering down of the principle of the prohibition of financial compensation for the entitlement to leave in Article 7(2) means an additional weakening of their position, which – without corresponding countermeasures – could scarcely be harmonised with the purpose of the Directive. 89. It is therefore proposed that the answer to the first question referred in Case C-131/04 and the first and fourth questions referred in Case C‑257/04 should be that it is for the national court, when assessing individual or collective agreements on rolled-up holiday pay, to examine to what extent workers have an effective possibility of actually taking the minimum annual leave to which they are entitled. Such a possibility will probably be excluded as a rule where the agreement is confined to providing for payment for minimum annual leave to be made together with payment of the basic pay without regulating – possibly in a further agreement – the taking of leave itself. C – Second and third questions in Case C‑257/04 and second question in Case C‑131/04 90. If an agreement on rolled-up holiday pay is permissible in principle, the referring court seeks to know, by its second question in Case C‑257/04, whether it would then nevertheless be precluded by Article 7 of the Directive if the employee’s pay were the same before and after the coming into effect of the agreement, so that the agreement did not bring about any additional remuneration, but led rather to part of the remuneration payable to the employee being attributed to holiday pay. 91. Should the agreements at issue on rolled-up holiday pay not be permitted, the referring court and tribunal, by the second question in Case C‑131/04 and the third question in Case C‑257/04, seek essentially to know whether the remuneration already paid in accordance with the agreements may be set against the continuing entitlement under Article 7 of the Directive to payment for the annual leave in question. 1. The need for holiday pay to be paid in addition to the remuneration for work a) Essential submissions of the parties 92. Mr Clarke as applicant in the main proceedings in Case C‑257/04 is of the view that the arrangement prevailing before August 2001 was incompatible with the Directive because the holiday pay – that is, the proportion of holiday pay in wages – could not be determined. Since it was only after conclusion of the agreement in question on rolled-up holiday pay that the respondent concerned, Frank Staddon, began indicating separately on the pay slips the proportion of holiday pay in wages, and no pay increase took place in that connection, the separate indication amounted to a reduction in the hourly rate of pay. 93. The respondent Frank Staddon, the only one of the respondents in these main proceedings to be affected directly by this issue, has made no observations on this point. 94. The United Kingdom Government submits that it is for the national court to ascertain whether the fact that the amount of remuneration remains the same before and after the separate indication of holiday pay suggests that the worker is in reality not in receipt of any holiday pay. 95. In the Commission’s view, payment for annual leave must, in the rolled-up holiday pay system, actually be added to the normal hourly rate (before the agreement) in the form of a specified percentage or a specified amount. 96. Ireland does not consider it necessary to address this question, since it regards the system of rolled-up holiday pay as incompatible with Community law in any case. b) Legal assessment 97. It should be noted to begin with that the referring court clearly does not refer in its question to the time of the separate indication of holiday pay but rather to the coming into force of the agreement on rolled-up holiday pay itself. 98. To fulfil the purpose of enabling the worker to take his leave and encouraging him to do so, the application of Article 7 of the Directive must effectively lead to holiday pay being paid in addition to the wages paid in respect of working time. This additional payment may in principle be effected by means of a single additional payment to account for the entire entitlement, or by adding the corresponding amount to the hourly, daily or weekly pay. The latter method means that from the coming into effect of an agreement for rolled-up holiday pay – provided always that such an agreement is to be regarded as compatible with Article 7(1) of the Directive at all – increased pay must be paid. 99. Where, then, the amount of a worker’s pay remains the same before and after the coming into effect of the binding agreement, the only change effected by the agreement consists in the attribution of part of the remuneration paid to the entitlement to leave. It is thus obvious that, after the coming into force of the agreement, the employer is fulfilling the entitlement to paid leave only in appearance. The objective of guaranteeing minimum paid leave would thus be missed. The employee in that case would precisely not have payment for his period of leave to enable him actually to use his leave as free time. 100. In the Clarke v Staddon case which forms part of Case C‑257/04, however, it was already agreed in the contract of employment that the pay included holiday pay. The precise proportion was fixed subsequently, by a later agreement. The danger of fulfilment in appearance only presumably does not exist to the same extent in such situations, since the remuneration in question is included from the first agreement, but stated separately only as a result of the second agreement. 101. In this case, however, the problem is one of transparency. If it is not visible to the employee what proportion of his pay is intended for meeting his living costs and what proportion is intended to enable him to use his holiday entitlement, it will be difficult for a worker with a low income in particular actually to save that – unidentifiable – financial proportion for his period of leave. The lack of transparency thus contributes here to deterring him from taking his minimum annual leave. That is all the more so if – as may be seen from the Caulfield and Others v Marshalls Clay case which also forms part of Case C‑257/04 – the rate of pay which has been increased by holiday pay is also used as a basis for calculating pay for overtime. That pay then appears to the worker to be entirely pay for work, not (also) holiday pay. 102. This transparency – and the consequent making the worker aware (34) – is also clearly absent if it is not evident from the contract of employment that holiday pay is included in the remuneration paid. The situation then appears to the employee as if he were entitled only to unpaid leave. 2. The question whether sums already paid may be set off a) Essential submissions of the parties 103. The applicants in the main proceedings in Case C‑257/04 consider that the entitlement to paid annual leave under Article 7 of the Directive is infringed if, on the basis of an agreement on rolled-up holiday pay, sums already paid are set off against their entitlement to payment for annual leave. 104. The respondents in those main proceedings, on the other hand, are of the view that, even if an agreement on rolled-up holiday pay is in conflict with Article 7 of the Directive, it must be possible to set off sums already paid. Otherwise the employer would effectively have to pay holiday pay twice. 105. The United Kingdom Government considers that there is no reason not to take into account the holiday proportion of the remuneration paid, if that proportion has actually been paid in addition to the pay for work. After all, the employee will have been entitled to that sum only in respect of his entitlement to leave, and the intention of the contracting parties was thereby to pay holiday pay. 106. The Commission too considers that neither the wording nor the purpose of Article 7(2) prevents giving credit for sums already paid, where the payment which has already taken place and is included in wages has in fact been paid in addition to the basic pay. Article 7(2) merely emphasises that the actual taking of the guaranteed annual leave is the central requirement. 107. Ireland considers, by contrast, that giving credit for the sums already paid infringes the right to paid annual leave laid down by Article 7. b) Legal assessment 108. The answer to this question too depends decisively on the aim pursued by Article 7 of the Directive. The aim of an effective possibility of taking the minimum annual leave (35) cannot be achieved retrospectively, that is, at the time when the employee brings a claim for payment of his period of leave, since the year in question will usually be over. A subsequent order that the employer (again) pay the holiday pay without setting off the amounts already paid would thus be of a purely punitive nature. 109. It might, however, be appropriate, in the interests of effective legal protection, not to regard the payment made in instalments as the holiday pay required by Article 7 of the Directive, if the employer has chosen a model which does not comply with the requirement of transparency mentioned above (36) with respect to safeguarding the entitlement to minimum leave. In that case the risk of having to pay twice might deter employers at the outset from introducing agreements that are not permitted. A contrary argument is, however, that the employee would then receive a further financial incentive not to take the minimum leave which is to be allowed. 110. Subject again to the condition that the necessary transparency is observed, therefore, no reason can be seen why Article 7 of the Directive should preclude giving credit for sums already paid pursuant to an agreement on rolled-up holiday pay. V – Conclusion 111. On the basis of the above considerations, I propose that the questions referred to the Court should be answered as follows: (1) It is for the national court, when assessing individual or collective agreements on rolled-up holiday pay in the light of the legislation implementing Article 7 of Council Directive 93/104/EC of 23 November 1993 concerning certain aspects of the organisation of working time, to examine to what extent workers have an effective possibility of actually taking the minimum annual leave to which they are entitled under Article 7. Such a possibility will probably be excluded as a rule where the agreement is confined to providing for payment for minimum annual leave to be made together with payment of the basic pay without regulating – possibly in a further agreement – the taking of leave itself. Such an agreement will in any event not meet the requirements of Article 7 of Directive 93/104/EC if the precise proportion of holiday pay in the remuneration is not shown in transparent fashion, or if such information is only provided subsequently without the total amount paid being increased thereby. (2) Even if an agreement on rolled-up holiday pay, contrary to Article 7 of Directive 93/104/EC, does not guarantee the effective possibility of taking the leave owing to the worker, Article 7 of Directive 93/104/EC does not preclude sums which can be shown to have been paid as holiday pay in a way which is clear to the worker from being set off against any claims the worker may have. 1 – Original language: German. 2 – Council Directive 93/104/EC of 23 November 1993 concerning certain aspects of the organisation of working time (OJ 1993 L 307, p. 18, ‘the Directive’). 3 – Employment Appeal Tribunal, Marshalls Clay Products v Caulfield, (2003) IRLR 552. 4 – Inner House of the Court of Session, MPS Structure Ltd v Munro, (2003) IRLR 350. 5 – The sum which functions as remuneration during periods of leave will be described below as ‘holiday pay’, without it being intended to suggest thereby that holiday entitlement is being compensated by a monetary payment contrary to Article 7(2) of the Directive. 6 – Case C‑472/99 Clean Car Autoservice [2001] ECR I‑9687, paragraph 13, and Case C‑306/99 Banque internationale pour l’Afrique occidentale (BIAO) [2003] ECR I‑1, paragraph 88. 7 – The Court, according to settled case-law, attempts in all cases to provide the referring court with information which will be of use to it in deciding the case before it. See in this respect, for example, Case C‑424/97 Haim [2000] ECR I‑5123, paragraph 58, and Case C‑366/98 Geffroy [2000] ECR I‑6579, paragraph 20. 8 – It follows from the observations of both referring courts that the courts in England on the one hand and Scotland on the other have interpreted the transposing provisions differently with respect to the agreements mentioned. 9 – Joined Cases C‑397/01 to C‑403/01 Pfeiffer and Others [2004] ECR I‑0000, paragraph 113. See also, inter alia, Case 14/83 Von Colson and Kamann [1984] ECR 1891, paragraph 26, Case C‑106/89 Marleasing [1990] ECR I‑4135, paragraph 8, and Case C‑91/92 Faccini Dori [1994] ECR I‑3325, paragraph 26. See in addition Case C‑63/97 BMW [1999] ECR I‑905, paragraph 22, Joined Cases C‑240/98 to C‑244/98 Océano Grupo Editorial and Salvat Editores [2000] ECR I‑4941, paragraph 30, and Case C‑408/01 Adidas-Salomon and Adidas Benelux [2003] ECR I‑12537, paragraph 21. 10 – Pfeiffer and Others, paragraph 117. 11 – See also Pfeiffer and Others, paragraph 114: ‘The requirement for national law to be interpreted in conformity with Community law is inherent in the system of the Treaty, since it permits the national court, for the matters within its jurisdiction, to ensure the full effectiveness of Community law when it determines the dispute before it.’ 12 – There is also the fourth question in Case C‑257/04, which will be discussed together with those questions. 13 – Case C‑173/99 BECTU [2001] ECR I‑4881. 14 – BECTU, paragraph 34. 15 – BECTU, paragraph 35. 16 – See also paragraph 43: ‘It follows that the entitlement of every worker to paid annual leave must be regarded as a particularly important principle of Community social law …’. See also Case C‑342/01 Merino Gómez [2004] ECR I‑2605, paragraph 31: ‘Article 7(1) of Directive 93/104 … must be understood as meaning that the national implementing rules must in any event take account of the right to paid annual leave of at least four weeks.’ 17 – See Merino Gómez, paragraph 30. 18 – Article 7(2) of Directive 93/104 further makes it clear that the entitlement to minimum paid annual leave cannot be replaced by a payment in money. 19 – BECTU, paragraph 41. 20 – Cited in footnote 13. 21 – BECTU, cited in footnote 13, paragraph 37. 22 – The eighth recital appears of particular interest, and reads as follows, in extract: ‘… in order to ensure the safety and health of Community workers, the latter must be granted minimum daily, weekly and annual periods of rest and adequate breaks …’. 23 – Case C‑151/02 Jaeger [2003] ECR I‑8389, paragraph 70. 24 – See point 46 et seq. above. 25 – Jaeger, cited in footnote 23, paragraph 92. 26 – On this requirement of transparency, see also the observations below on the second question referred in Case C‑257/04, point 101 et seq. 27 – Contrary to the view of the respondents in the main proceedings and to the oral submissions of the Netherlands Government, which probably had another pending case (Case C‑124/05 Federatie Nederlands Vakbeweging v Netherlands) in mind, the present cases concern only the issue of the interpretation of national law in conformity with a directive, not the question whether a correct transposition of Directive 93/104 should include a duty on employees to take their leave, perhaps for recreational purposes. The Community law problem in connection with rolled-up holiday pay is not, for instance, that the worker is not obliged actually to take leave, but that he receives a financial incitement not to claim his ‘recreational entitlement’ under Article 7(1) of the Directive. 28 – BECTU, cited in footnote 13, paragraph 43, and Merino Gómez, cited in footnote 16, paragraph 29. 29 – See Articles 17 and 18 of the Directive. 30 – As said in BECTU, cited in footnote 13, paragraph 59, and Jaeger, cited in footnote 23, paragraph 67. 31 – BECTU, cited in footnote 13, paragraph 60, referring to Case C‑84/94 United Kingdom v Council [1996] ECR I‑5755, paragraph 44. 32 – The observations in points 85 to 87 do not therefore concern any employment in a shift system of a temporary worker as in Case C‑131/04. 33 – In several Member States the difficulty described has been solved by the establishment of holiday or pay settlement funds. In the Belgian and French systems of Caisses de congés payés, employers pay contributions to the fund concerned, which in turn proceeds to make payment for the annual leave, so that the employer pays only the proportion of pay for annual leave which the employee has acquired when working for him, while the employee receives his pay at the time of taking leave. The holiday and pay settlement fund for the building trade in Germany (Urlaubs- und Lohnausgleichskasse der Bauwirtschaft) appears to be comparable, with the entitlement to holiday pay being directed primarily against the employer. 34 – See point 78 above. 35 – See point 55 above. 36 – See point 101 et seq. above.