Recruiters may need alternative to paying staff commission
30 March 2015
Recruiters may have to think of ways of rewarding consultants other than paying commission due to a ruling laid down by the European Court of Justice last week, employment lawyers have said.
Mon, 30 Mar 2015Recruiters may have to think of ways of rewarding consultants other than paying commission due to a ruling laid down by the European Court of Justice last week, employment lawyers have said.
Following the ruling, the Working Time Regulations 1998 – legislation that governs the hours that people in the UK may work – have been brought into line with European law. This essentially means holiday pay calculations for workers who are paid commission as a part of their remuneration must now reflect the commission paid.
Employment law compliance consultancy Lawspeed warned in a statement late last week the decision has “far reaching” consequences for all the industry, including recruitment and umbrella companies, where workers receive commission as a significant part of their income. It added that future holiday pay calculations may need to be revisited and commission schemes reconsidered.
Suzanne Tyrrell, senior associate at international law firm Taylor Wessing, agreed.
She told Recruiter: "Negotiating pay packages for sales or other roles with a commission element is likely to be more problematic. There is an additional cost, which new employers may seek to recover, potentially by reducing the basic pay on offer to new hires or replacing commission with discretionary bonuses."
While the ruling may be appealed, umbrella company Parasol is urging recruiters to review their supply chain and ensure that their umbrella providers calculate holiday pay correctly.
The firm’s legal director Juliet Byrne said in a statement: “There will also be repercussions for any agency that operates a PAYE scheme for contractors and temporary workers working in sales-orientated roles but does not factor in commission when calculating holiday pay.”
There is a crumb of comfort though, Lawspeed adds, in that back pay claims will be limited to two years from 1 July 2015.
And trade body the Association of Professional Staffing Companies’ (APSCo) head of external relations & compliance Samantha Hurley, has pledged to look into the finer detail of the ruling. “We feel there could well be an argument and previous case law to suggest that commission for certain types of sales roles would not be intrinsically to linked the work done, and therefore should not have to be taken into account.”
Following the ruling, the Working Time Regulations 1998 – legislation that governs the hours that people in the UK may work – have been brought into line with European law. This essentially means holiday pay calculations for workers who are paid commission as a part of their remuneration must now reflect the commission paid.
Employment law compliance consultancy Lawspeed warned in a statement late last week the decision has “far reaching” consequences for all the industry, including recruitment and umbrella companies, where workers receive commission as a significant part of their income. It added that future holiday pay calculations may need to be revisited and commission schemes reconsidered.
Suzanne Tyrrell, senior associate at international law firm Taylor Wessing, agreed.
She told Recruiter: "Negotiating pay packages for sales or other roles with a commission element is likely to be more problematic. There is an additional cost, which new employers may seek to recover, potentially by reducing the basic pay on offer to new hires or replacing commission with discretionary bonuses."
While the ruling may be appealed, umbrella company Parasol is urging recruiters to review their supply chain and ensure that their umbrella providers calculate holiday pay correctly.
The firm’s legal director Juliet Byrne said in a statement: “There will also be repercussions for any agency that operates a PAYE scheme for contractors and temporary workers working in sales-orientated roles but does not factor in commission when calculating holiday pay.”
There is a crumb of comfort though, Lawspeed adds, in that back pay claims will be limited to two years from 1 July 2015.
And trade body the Association of Professional Staffing Companies’ (APSCo) head of external relations & compliance Samantha Hurley, has pledged to look into the finer detail of the ruling. “We feel there could well be an argument and previous case law to suggest that commission for certain types of sales roles would not be intrinsically to linked the work done, and therefore should not have to be taken into account.”
