Holiday pay commission

  • British Gas salesman wins at employment tribunal
  • Holiday pay to be recalculated
  • Companies now faced with back payments of ‘unpaid’ commission

Michael Godsmark,

May 30, 2014

Holiday pay for people who earn sales commission will now be much more complicated to calculate.

A European ruling has meant that companies could be forced to pay billions in back dated commission, overtime and bonuses.  Employees who earn commission on top of their annual salary are in line for a payout.

The court case between Lock and British Gas decided that holiday pay should be increased to take account of commission as a result of the of working time directive (WTD).

Lock’s commission was around 60% of his pay, however when British Gas calculated the holiday pay they only used his basic pay as he wasn’t generating any commission. Lock brought an employment tribunal claim against his employers and the tribunal asked the European Court of Justice if the WTD should be taken into account.

Although it was agreed that Lock’s commission varied month to month, it was regular and permanent enough to be considered part of his normal monthly wage.

The judgment hasn’t yet provided the answers to calculate the holiday pay.

The default position at the moment is to calculate holiday pay as per normal working hours – this may not now work in British law.

There may be a 12-week averaging period, as is already the case for workers on variable hours. Clarification is needed.

What companies should look to do now

Companies should look at commission schemes and see if they can be appropriately redesigned or amended. The top line of commission could be adjusted, or commission paid over a longer period to lessen the top line of pay.

If you’d like to discuss how this could affect your business, why not ask your accountant at Woodville in Chorley.

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About The Author

Michael is an enthusiastic and cheerful individual who, when not hard at work, enjoys mountain biking, cooking curry and travelling to new places.

   @MichaelWDVLL

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