The most anticipated Judgment of 2015 (so far) is out…yesterday a ruling was handed down in the case of Lock v British Gas which settled once and for all whether or not commission payments should be included in holiday pay.  The short answer is that they should.

The law is far from finalised on this, but this is what we now know (and do not know) about holiday pay:

What we know:

  1. All of the recent holiday pay rulings apply to 4 weeks / 20 days holiday only. That means that the other 1.6 weeks / 8 days of employees’ statutory entitlement is not covered by these rules or the scope of this article.
  2. When on holiday, employees must receive earnings which take account of overtime (excluding, for now, truly voluntary overtime), commission, and any other payments “intrinsically linked” to role performance.
  3. The law has been amended to set out how holiday pay should be calculated whilst employees are on holiday, so that the pay they receive during their holiday is the same as what they would receive were they at work.
  4. When employees are actually on holiday, they are unable to earn commission or work overtime during that time. That means that when they return from holiday, their earnings are effectively reduced in the following weeks. Employees are now entitled to be compensated for that loss of earnings.

What we do not know:

  1. The Tribunal did not decide how to calculate compensation due to employees in respect of the commission and overtime that they are unable to earn whilst actually being on holiday. That will, unhelpfully, be determined at a later date.
  2. It has been suggested that it might be possible to interpret the law so that commission schemes operate already to effectively compensate employees for being on holiday, such that no further money is due to them. This has not been decided.
  3. For now, no ruling has been made as to whether or not bonuses are included in holiday pay. As UK law currently stands, they are not.

What can you do about this?

In most cases, the cost of complying with these obligations will not be as significant as it may first appear. However, for those employers who utilise commission and overtime heavily, and who really cannot afford to absorb the increased holiday pay costs, there are three broad options:

  1. Review existing commission and overtime arrangements and consider revising them.
  2. Consider varying other contractual terms like basic pay, hours of work, or benefits.
  3. Consider a redundancy exercise to reduce costs.

Time is of the essence, but none of these steps can be taken lightly. The Employmentor team is on hand as usual and can help guide subscribers through the above processes at our reduced hourly rates.  If you would like further advice and guidance on how to implement any of the 3 options above, please telephone 01603 281139 or email email hidden; JavaScript is required.

Note: The content of this article is for general information only and does not constitute legal advice.

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