Employers must now include commission in holiday pay, the Employment Appeal Tribunal (EAT) has ruled.
But employers must be careful because the tribunal does not give much guidance on how to implement the new ruling, warn Dorset employment solicitors Coles Miller.
Commission payments must be taken into account when calculating holiday pay for employees: otherwise any deductions could effectively penalise them for taking time off.
The long-awaited ruling by the EAT in the case of Lock v British Gas Trading Ltd follows nearly four years of legal wrangling.
But the EAT does not give a precise formula to calculate how much commission to add to basic holiday pay, other than to refer employers to the Working Time Regulations.
So employers acting in good faith could still unwittingly breach the rules, warns Coles Miller.
And any employees unhappy that their holiday pay does not include enough commission could still take legal action.
“Employers will not be happy that the EAT’s decision has gone against them – and even less impressed with the lack of clarity on compliance,” said Coles Miller’s Neil Andrews.
“Effectively the EAT has told employers what they must do…but not how to do it.
“That’s a real problem, given the inherent complexities of commission structures. It puts employers at risk of inadvertently triggering tribunal claims.”
So what should employers do to protect themselves? Coles Miller recommends paying commission and overtime as part of holiday pay based on guidance in the Working Time Regulations.
“But it is important to get legal advice first. The new EAT ruling shows this area of the law is still far from clear,” said Mr Andrews.
For more information, contact Neil Andrews at Coles Miller’s Poole office, 01202 355695.