The Confederation of British Industry (CBI) and the Institute of Directors (IoD) have thrown their weight behind a campaign to get the Government to renegotiate treaties with the EU after a ruling by the European Court of Justice (ECJ) on holiday pay that could hit firms, with costs running into billions.
Holiday pay in the UK is currently calculated on the basis of a ‘week’s pay’, which is based on basic salary and excludes payments such as expenses, working allowances, overtime, commission and bonus payments.
However, in a recent case involving a British man, the ECJ ruled that holiday pay must include an allowance for commission, despite the fact that commission is paid on sales made and the employee could not have made any sales while on leave.
The judges’ argument was that since the man’s salary comprised of around 60 per cent commission, not being paid what he normally would could deter him from taking holiday, which contravenes the Working Time Directive.
Following the ruling, employees could legally make backdated claims to have commission built into their holiday pay, which, according to the CBI, could lead to costs of billions of pounds. In fact, the business group has worked out that in one sector alone, bills to employers could reach £750m.
Given this situation, which could see otherwise solvent firms run into financial difficulties, a spokeswoman for the IoD has said that the Prime Minister must act quickly to ensure that maximum flexibility in EU labour law is a key target as he seeks to renegotiate the UK’s relationship with the EU.
Meanwhile, given that claims could be backdated to 1998, when the Working Time Directive was enshrined in UK law, a spokesman for the CBI said that this is the single biggest employment issue for businesses at the moment, affecting small and large firms alike and putting jobs and growth at risk.