Are You Miscalculating Agents’ Holiday Pay?

The Supreme Court has agreed that holiday pay must include any allowances that are intrinsically linked to the performance of work – including commission.

In the Supreme Court case of British Airways v Williams, the court agreed that holiday pay must include not just basic pay, but any allowances that are intrinsically linked to the performance of work under the contract.

Therefore, a flying allowance must be included in the calculation of holiday pay.

It is essential that pay for holidays is comparable to pay when working, as otherwise employees could be discouraged from taking their annual leave.

Most employers were content to ignore overtime and commission

Employers will be aware that the Working Time Regulations guarantee 5.6 weeks’ paid annual leave for all workers.

For each week of leave, employees are entitled to be paid a normal week’s pay, and the Regulations refer to the Employment Rights Act (ERA) for the calculation of a week’s pay.

Relying on the relevant provisions in the ERA, most employers were content to pay only basic salary for a period of holiday, and to ignore overtime, commission, etc.

Employers need urgently to review their approach to calculation of holiday pay

However, the decision of the Supreme Court emphasises the need for employers to review their approach to calculation of holiday pay – and to consider issues of overtime, bonus, commission and shift premium.

These decisions relate only to the 4 weeks’ annual leave that are mandatory under European law.

With thanks to Caroline Carr at bto Solicitors