Supreme Court rules that holiday pay must be based on basic pay and commission

In October 2016, the Court of Appeal ruled, in the British Gas v Lock case, that results-based pay must be taken into account when calculating holiday pay. British Gas appealed the decision. On February 28th 2017, British Gas was refused leave to appeal, following a Supreme Court hearing.

Dave Prentis, Unison General Secretary:

It’s taken nearly five years to get here, but now all employees who earn commission will see that reflected in their holiday pay.”

In terms of the scale of ‘results-based’ payments awarded by GB companies, ONS data for the financial year ending March 2016 showed that “the combined value of all bonuses paid was a record £44.3 billion, surpassing the previous highest amount seen in the financial year ending 2008 and 4.4% higher than in the financial year ending 2015.”

Bonuses as a percentage of total pay were 6.0% overall. The ‘whole economy’ average bonus per employee was just under £1,600 (comprised of a £1,900 average for private sector employees and just over £100 for those in the public sector). Of note, the average bonus per employee in the financial and insurance activities industry in the financial year ending 2016 was £13,400.

The Freelancer and Contractor Services Association (FCSA) states that from a recruitment industry perspective, the impact will be notably felt in relation to the payment of recruitment consultants, who have traditionally received commission-based payments. Holiday pay must now take into account both basic pay and any commission they earn. The ruling only applies to the 4 weeks’ holiday guaranteed by the Working Time Directive, however, and not the UK’s additional 1.6 weeks’ statutory holiday or additional contractual holiday. Retrospective claims are likely.

Published on: 08 March 2017 - By: FCSA

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