Companies could soon have to increase holiday pay for their sales teams following a landmark court case. The test case involving British Gas, and one of its sales consultants, could have potentially costly consequences to many local firms.
Our Payroll Manager, Chris Dorricott, explains: “Under existing regulations, all British workers have the right to paid annual leave, based on their weekly salary.
“But that does not currently include any commission that the worker may earn. And in some cases, partiuclarly with sales jobs, commission forms a significant proportion of annual earnings.
“Following a case in the European Court of Justice, commission must now be included when it comes to calculating a worker’s holiday pay entitlements.”
Chris added: “The British Gas salesman successfully argued that the money he was paid whilst on leave should also reflect the amount he would have earned in commission during that time.
“The Court agreed that commission is intrinsically linked to an employee’s performance of the tasks carried out under a contract, and should therefore be taken into account in leave calculations.
“There is no doubt that this ruling could cost some companies a significant amount of money, and be a big boost to workers who have commission-linked contracts.
“But there is no need for companies to panic about this just yet. The UK’s rules on the calculation of holiday pay have to be referred back to the British courts in the light of this EU decision, and that will undoubtedly take some time.
“But it is worth bearing mind there may be a requirement to review how you calculate holiday pay in the future, taking into account not just commission, but possibly any overtime which your workers receive too.”
Chris Dorricott, Dyke Yaxley’s Payroll Manager