A landmark ruling by the Employment Appeal Tribunal (EAT) means that workers who depend on commission can now ask for extra holiday pay from their employers.
The decision relates to holiday pay for workers whose income regularly includes commission, so has serious legal and financial implications for many employers. Here, Sara Beaumont explains what the ruling means.
Employers lose out as long-running case is finally resolved
Following a four-year legal battle, the EAT recently ruled in favour of a British Gas salesman who made most of his salary from commission, but received only basic pay while on holiday.
Joe Lock’s pay package comprised both a basic salary and commission, based on the number and nature of contracts signed by customers, so he argued his holiday pay discouraged him from taking annual leave.
The European Court of Justice ruled that because Mr Lock’s commission related to his usual duties, it should be taken into consideration when working out his holiday pay. The decision was made to prevent employees from avoiding using their holiday entitlement and in doing so failing to comply with the Working Time Directive.
The case then came back to the British tribunal to apply the ruling in UK law.
What the future looks like when calculating holiday pay
The ruling has clarified that going forward employers will have to fund holiday pay that includes a combination of both basic pay and contractual commission.
While it will inevitably result in extra costs, employers need to ensure they comply otherwise they risk facing a raft of costly employment law claims for unlawful deductions from wages.
The practicalities of calculating these new payments has not yet been decided, so until this happens we expect tribunals to take a case-by-case approach. It is therefore vital that business owners seek the specialist advice of an employment law expert to ensure compliance in this complex area of law.
For further advice on holiday payment, call Sara Beaumont on 0161 761 4611, or email her at sara.beaumont@whnsolicitors.co.uk
