EMPLOYERS have been warned that sales-based commission must be included when calculating holiday pay, following a landmark court ruling.

In the case of British Gas Trading vs Lock and another, the Court of Appeal upheld the decision of the Employment Appeals Tribunal that holiday pay should include commission.

Mini Setty, partner in the employment team at York-based Langleys Solicitors, said the move could affect thousands of companies, including those that employ sales professionals.

Mr Lock worked for British Gas as a sales consultant. He was paid a basic salary plus commission on sales he generated, usually paid after the sale concluded.

This meant that whenever Mr Lock went on leave his income was significantly reduced due to lack of commission during that period. He complained this was a breach of the Working Time Directive.

The case ended up at the Court of Appeal, whose decision means that ‘commission’ joins a growing list of types of remuneration which should be included when calculating holiday pay.

Ms Setty said: “Employers should take stock and consider the prospect of historical claims by workers for the inclusion of commission, overtime payments and other allowances in their holiday pay.

“Employers may also wish to consider how they calculate holiday pay in the future.” She said the position regarding completely voluntary overtime remained unclear.