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Holiday pay and commission: payroll advice

Sarah Pownall, head of payroll services at Clayton and Brewill in Nottingham, looks at a recent court ruling that workers’ holiday pay should include commission.

On 7th October 2016 The Court of Appeal upheld the decision in the British Gas case that workers’ holiday pay should include any results-based commission that they would have ordinarily earned.

Whilst a further appeal at the Supreme Court may be likely from British Gas, employers should begin to plan for how they will deal with both assessing and making these commission payments.

Consistency will be key

There has so far been no guidance in terms of the period over which an ‘average’ commission payment should be based and so individual companies must set their own, based on how commissions are calculated.

We would recommend, in most instances, using a rolling 12 week / three month period to assess average commission levels but you may have business factors that would make an annual assessment fairer – for example if you have extreme seasonality in commission earnings.

However it’s done, it must be applied consistently across the work force.

The ruling affects just the statutory four weeks’ of holiday, further complicating the payroll processes!

We would also recommend that businesses talk to their employment lawyers to ensure that contracts of employment reflect the changes to commission payments.

For help with putting together a plan for making commission payments through the holiday pay please contact the experienced payroll team at Clayton & Brewill on 0115 950 3044 or click here to send us an email.

For a detailed look at the British Gas case please click here to read an article on Personnel Today. 

Clayton & Brewill chartered accountants are based in Nottingham, with offices in Long Eaton and Melton Mowbray. We work with business owners and individuals to provide tax advice, carry out audits, prepare accounts and manage payrolls.