Contract workers or temporary workers (including temporary agency workers) are entitled to paid holiday. Short contract, temporary or agency workers should receive holiday pay in the normal way set out in this guidance. If the worker does not take their accrued holiday entitlement by the time they leave employment, they should be paid for this untaken holiday (known as ‘payment in lieu’). This should be calculated by working out the individual’s remaining holiday entitlement (use the holiday entitlement calculator) and then working out their holiday pay for this period (see Holiday pay: the basics). Employers should remember to deduct any holiday taken from the total holiday entitlement to correctly calculate the remaining holiday the worker is entitled to. Example A worker is employed for 2 weeks. They start to accrue holiday entitlement from day 1 but take no holiday leave during the 2-week period. At the end of their contract (termination of employment) they should be paid in lieu for all holiday accrued during this 2-week period. The holiday entitlement calculator can be used to calculate the paid leave that a worker has accrued. Holiday pay for the leave accrued should then be calculated using an average of the 2 weeks in which they were paid. Workers must take the annual leave that they are entitled to and be paid when they take it. It is not acceptable for an employer to add an amount on top of a worker’s hourly rate to take account of holiday pay. This is known as ‘rolled up’ holiday pay. Following a Court of Justice of the European Union (CJEU) decision,[footnote 10] this is unlawful as workers should be encouraged to take leave from work (receiving their normal level of pay while they are on holiday). Rolled up holiday pay acts as an unlawful disincentive to take holiday, as a worker’s hourly rate includes the additional top up amount. It can also result in an underpayment of a worker’s statutory holiday entitlement. For further information please contact Acas.