Employers in Gedling borough are being warned that sales-based commission must now be included when calculating holiday pay, following a landmark court ruling.
Following the recent case of British Gas Trading v Lock and another, the Court of Appeal upheld the decision of the Employment Appeals Tribunal that holiday pay should now include commission.
Mr Lock worked for British Gas as a sales consultant. He was paid a basic salary and also commission on the sales he made, this was usually paid after the sale concluded.
This meant that whenever Mr Lock went on leave his income was significantly reduced due to lack of commission during that period. Mr Lock complained this was a breach of the Working Time Directive.
The Employment Tribunal referred the case to the European Court of Justice, which determined that a workers’ remuneration should include any contractual commission and that any calculation of holiday pay based on basic pay alone was incompatible with the Directive.
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The Employment Tribunal decided that any commission should be included in holiday pay. British Gas appealed that decision but the Court of Appeal confirmed that, where remuneration includes sales-based commission, holiday pay cannot be calculated on basic pay alone.
This means that ‘commission’ joins a growing list of types of remuneration which should be included when calculating holiday pay.
To get clarification on the situation, Gedling Eye contacted Gedling-based solicitors Integra Legal and solicitor Wayne Smith was happy to explain what this ruling will mean.
He said: “The Court of Appeal’s decision in Lock is important but does not say anything new. It merely confirms that, when calculating holiday pay, workers are entitled to be paid an amount which reflects the commission they would have earned if not on holiday.
“This is just the latest in a line of decisions based on European law all moving in the same direction. In most similar cases the same principles will apply so that elements of workers’ pay which vary over time, for example overtime payments, bonus payments and some forms of allowances, will need to be included in holiday pay calculations in the future. It will be interesting to see if this employee-friendly trend continues after Brexit.
He added: “What is less clear is how these decisions apply to payments such as discretionary bonuses or overtime which is not compulsory. Similarly, there is on clear indication as to how the payments should be calculated. Because of this affected employers should take advice as soon as possible.”
The firm, which has an office on Waterhouse Lane, is running a series of free employment law workshops for employers in Nottingham during November.
The seminars will include an update on the Lock ruling. You can find out more information here: http://www.integralegal.co.uk/integra-legal-autumn-employment-law-seminars/
