The Court of Appeal (right) has confirmed a ruling concerning holiday pay this past Friday that is set to have far reaching consequences for recruitment agencies and the consultants they employ, employment lawyers have warned.

The decision, originally in a case brought by public service union UNISON against British Gas, confirms that anyone whose pay includes an element of commission can no longer be paid less for periods of annual leave.

From now on, the amount that employees get for their holiday must be based on both their basic pay and any commission they earn.

UNISON general secretary Dave Prentis said: “Until now some employees who relied upon commission and overtime lost a significant amount of money. It’s only fair that workers should receive their normal pay, including their regular commission, whenever they take their annual leave.”

This case is expected to have implications for employees, including recruitment consultants, who normally receive commission and are paid less than their normal income during periods of annual leave.

Commenting on the ruling employment lawyer Glenn Hayes, partner at law firm Irwin Mitchell, said: “This ruling means that thousands of workers whose remuneration includes commission that is regularly earned or receive similar payments, should now have their holiday pay calculated in the same way as workers whose pay varies according to how much work they actually do. Commission will have to be included in the calculation if the worker can establish that taking a holiday realistically prevented him from earning commission.”

But Christopher Tutton, partner at law firm Constantine Law, warns agencies and businesses still need more detail in terms of how such commission should be calculated.

Tutton told Recruiter: “Until recruiters and businesses understand this, it will not be possible to know whether working practices are compliant with the legislation. With the case likely to be appealed to the Supreme Court, it will be some time yet before the position is clarified.”

Tutton adds a bigger question for employers and agencies relates to how Brexit will affect legislation such as Working Time Regulations (WTR). 

“For decades, the UK’s implementation of the Working Time Directive (in the form of the WTR) has led to significant inconsistency and resulted in a body of case law in which UK judges have to rewrite the WTR. While the government has recently announced that UK employment law will be held in place once we Brexit (by enacting the Great Repeal Bill) the likelihood is that we will see changes to the law on working time and a move towards limiting holiday pay calculations to basic pay only.”

British Gas has applied for permission to appeal the decision at the Supreme Court.

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