Landmark ruling says holiday pay must include commissions
On 22 February 2016 the Employment Appeal Tribunal handed down a judgment, in the case of British Gas Trading Limited v Lock, which confirmed that employees’ holiday pay should include any commission payments that would have been earned while they were at work.
This means that companies whose employees earn commission as part of their pay could face numerous holiday pay claims. Employees can claim for holiday pay wrongly calculated over the past two years.
The Employment Appeal Tribunal has ruled that working time regulations can be interpreted to include commission payments. The ruling follows the decision in November 2014 in the case of Bear Scotland which confirmed that non-guaranteed overtime should be included in holiday pay.
It is worth noting that the position on whether voluntary overtime should be included in holiday pay is still unclear.
The test case was brought on behalf of 918 other claims against British Gas across the country, so it will have a significant impact on British Gas but also on the many employers who use commission structures as part of their employees’ financial packages.
Many employers have been awaiting this outcome and therefore it will now be crucial for them to seek guidance and advice on how to correctly calculate holiday pay in order to avoid potentially costly claims in the Employment Tribunal.
It may be advisable for companies to consider whether contracts of employment need to be updated.
If you are concerned about any potential liabilities, or receive a claim against your business in respect of holiday pay, please contact either Rhiain Lewis (01752 513532/rhiain.lewis@GASolicitors.com) or Rob Zacal (01752 513549/robert.zacal@GASolicitors.com) and they will be able to help.