A recent European Court of Justice ruling means that employers are required to take into account commission earned when calculating holiday pay if the commission is wholly or partly part of an employees' salary.
This ruling came after a sales employee at British Gas took the company to an employment tribunal over their calculation of holiday pay. The employee was paid a basic salary but earned commission on top of this which typically accounted for 60 per cent of his total pay. British Gas had calculated hsi holiday pay entitlement solely on his basic salary.
The employee's commission was directly linked to the work normally carried out and, despite fluctuating from month to month, it was considered to be permanent enough to be regarded as part of nomal monthly pay.
This ruling may result in more complicated and expensive pay calculations particularly where commissions are payable. It may be that regular overtime and bonuses could also be considered as part of normal salary and therefore should be included in any holiday pay calculation.
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