Employers will have to pay commission as part of holiday pay, the Employment Appeal Tribunal (EAT) has confirmed.
The decision was handed down in the long-running case of Lock v British Gas Trading Ltd, which was first brought to tribunal in April 2012.
The EAT ruled in favour of British Gas salesman Joe Lock who only got his basic pay while away on holiday, despite getting most of his money from sales commissions.
This means a precedent has been set meaning people in similar jobs will be able to get paid on what they normally make.
Commenting on the case UNISON General Secretary, Dave Prentis, said: “This is a victory both for employees and for those that believe in fair pay. From the very beginning, UNISON has fought for workers to have their commission included in their holiday pay. This case will have implications for thousands of workers across Europe who for years have been denied a fair deal.
“Until now some employees who rely upon commission and overtime have lost a significant amount of money. It’s only fair that workers should receive their normal pay, including their regular commission, whenever they take their annual leave.”
The case was originally taken by Lock to an employment tribunal, which referred it to the European Court of Justice (ECJ) to clarify the relationship between holiday pay and commission for workers where commission was a regular part of payment.
The ECJ concluded that because his commission was linked to the work he carried out, it must therefore be taken into account when calculating holiday pay. However, it referred the case back to the Employment Appeal Tribunal (EAT) so it could apply its ruling to UK law.
While the court was in favour of Lock, British Gas appealed its initial decision, claiming it would be “judicial vandalism” to follow the ECJ’s recommendations.
Now, the EAT’s latest decision will officially force employers to review their holiday pay allowances.
And a spokesman for UNISON said workers could now ask for as much as two years’ worth of backdated pay, adding: “You can say ‘I am in the same situation so I am owed this money.’”
A similar ruling in 2014 confirmed the right of workers regularly doing overtime to have this included in their holiday pay.
However, this may not be the end of the matter. Lucy Lindstrom, head of employment law at British Gas, said: “We note the decision of the Employment Appeal Tribunal. We have requested permission to appeal to the Court of Appeal so that there can be a definitive ruling on this issue.
“We are also continuing discussions already underway with our trade unions over how best to approach holiday pay in the future.”
The ruling is significant for companies that operate commission schemes. Employers who have ignored the situation or were awaiting the outcome will be under pressure to acknowledge the issue and deal with it properly.
For more information on employment law, please contact us today.