A European ruling passed last week will require construction firms to overhaul holiday pay entitlements.
The European Court of Justice has concluded that under the working time directive it is unlawful for workers to agree to forego their holiday entitlement for an enhanced daily, hourly or weekly pay rate. This practice is used by many UK construction firms, particularly those that employ agency labour.
The ruling, reached by judges in Luxembourg, will end the practice, known as "rolled-up holiday pay".
The decision to make the change over paid holidays follows pressure from unions, which complained that the system was being abused and that temporary workers were being deprived of paid holidays.
Alan Ritchie, UCATT general secretary, said: "This is a victory for common sense. Construction employers denied workers their holiday pay by rolling it into their basic rate. This unfair practice must now stop.''
Employers have been advised to pay employees for specific periods of leave in future.