Thousands of sales personnel and other workers who rely on commission payments for much of their earnings could be in line for substantial increases in their holiday pay following a landmark Court of Appeal ruling.
The case concerned a British Gas (BG) salesman whose basic salary was dwarfed by his success-based commission payments. BG, however, assessed his holiday pay entitlement solely by reference to his basic salary. He complained to an Employment Tribunal (ET) that that approach amounted to making unlawful deductions from his pay. Thousands of similar claims, including over 900 by BG employees, were waiting in the wings for the outcome of the case.
In a ruling that was subsequently upheld by the Employment Appeal Tribunal, the ET found in the salesman’s favour on the basis that the commission element was required to be taken into account when calculating his holiday pay. The ET’s decision involved reading additional words into the Working Time Regulations 1998 (WTR) in order to bring them into conformity with European law.
In dismissing BG’s appeal against that ruling, the Court of Appeal noted that the WTR had been enacted solely and deliberately for the purpose of implementing the requirements of the European Working Time Directive (WTD). There was no dispute that the WTD required holiday pay to be calculated on the basis of a person’s normal remuneration, including commission payments. There was a presumption that the UK Government had, by introducing the WTR, intended to fulfil in their entirety the obligations arising under the WTD.
The Court noted that concerns had been raised as to the wider consequences of its decision, for example in relation to bankers and other financial services workers who receive most of their earnings in the form of a single annual bonus. It emphasised that its ruling was confined to the particular facts of the salesman’s case and that different facts might result in different outcomes.