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Ruling may leave firms with large holiday pay costs

AN employment lawyer has warned businesses are likely to face large bills if legal changes relating to commission and holiday pay come into force early next year.

Lorna Gemmell, associate at MacRoberts, believes a case, Locke versus British Gas Trading Limited and Others, is going to lead to a shake-up of how companies work out how much staff should get paid.

Mr Locke was a salesman who earned up to 60% of his annual wage through commission but only got a basic salary at times when he was on holiday.

He made a claim in the Employment Tribunal suggesting his holiday pay should be calculated using his total earnings including commission.

The Tribunal then referred the matter to Europe as it is based around the Working Time Directive law which provides for a minimum of four weeks paid leave for full-time workers.

The Advocate General of the European Court of Justice has already given his opinion in the matter and sided with Mr Locke.

Now the binding judgement from the Court is expected in January or February with very few examples of cases where the Advocate General's opinion has not been followed.

Ms Gemmell says this potential change to the law will also apply to other types of additional payments such as shift allowances.

She said: "Employers can more or less be certain that additional payments on top of basic pay, except expenses, should be included.

"This could have massive implications for many employers. Employees could raise claims in the Employment Tribunal going back many years."

Ms Gemmell suggested liability could stretch as far back as 1998 when the Working Time Directive was brought in.

However she indicated employers may only have to pay additional money on the four weeks of holiday covered by the Working Time Directive rather than the 28 days or more typical in the UK.

Ms Gemmell believes business owners need to decide which options are best for them.

She said: "There is the potential to limit liability and as solicitors we would be advising clients to first of all do an analysis to see how this might affect them.

"Once they have done that then if there are any areas of exposure they need to come up with a strategy of how to deal with it.

"Employers could make a one-off payment in respect of what employees have been underpaid and get them to sign a settlement agreement."

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