The Court of Appeal has recently decided an important case relating to whether holiday pay has to be calculated taking commission payments into account.
The Court was asked to consider: 'The practical question that is raised is whether the holiday pay of an employee with statutorily defined 'normal working hours', whose remuneration does not vary with the amount of work done during such hours, should (i) be calculated solely by reference to his basic pay; or (ii) include an element referable to the amount of the results-based commission he normally earned.'
The claimant worked for British Gas and earned a basic salary. He was paid a commission based on his sales performance and this figure fluctuated. His holiday pay was calculated by reference to his basic salary. This meant that when he took annual leave, his pay was a lot less than his usual salary. The claimant argued that this outcome was a disincentive to take annual leave.
The Court held that the holiday pay should include the results based commission that would be ordinarily earned. There are a number of pending claims on this subject which will proceed and more that will no doubt be brought.
This case could have far reaching practical effects for private employers as it is now necessary to take commission into account when calculating holiday pay.
Employers should be reviewing their contracts of employment and ensuring that their workers are not in a position where they might be able to bring a claim.
Link to the case: http://www.bailii.org/ew/cases/EWCA/Civ/2016/983.html
To discuss this or any other employment related issue, contact us.