Tuesday, 11 October 2016

HOLIDAY PAY AND COMMISSION

If your salary includes commission then your holiday pay should include commission. That's what the Court of Appeal decided last Friday. So congratulations to you dear employees and commiserations to you dear employers. 

The case concerned an employee who received an annual salary of £14,670 with commission on top for inducing customers to sign up to his employer's energy products. That commission normally came to over 60% of his pay packet. The employer gave him holiday pay which was calculated solely by reference to the basis salary. The commission element which was disregarded should have been included, ruled the appeal court.

Employers will be scratching their heads to decide exactly how the commission element is to be calculated for their employees who would otherwise lose out while they were away from work. The Court of Appeal has not given any guidance on the formula to be used. Indeed, it declined to give any hint on how an employer should deal with an employee who, say, only became entitled to commission in a particular year once a certain level or profit or turnover was achieved or  a banker who received a fat results based bonus in March each year and took off for holiday in the summer.  

If the man next to you in a cafe has a calculator in his hand and a frown on his forehead, don't knock his coffee as you leave . He could be an employer with commission earning employees about to have a few weeks off.