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EU and Unions Blow to SMEs

european union

Holiday Pay to Include Commission

Following British Gas Case

In an EU ruling to send a shiver down the spine of UK SMEs, the European Court of Justice (ECJ) earlier this year ruled that workers had a ‘right’ to claim for holiday pay and overtime that takes account of gross earnings including commission and not just base salary.

In Europe, the EU claims that companies work on the principle of combining all these “irregular” earnings to get an average weekly figure when calculating holiday pay, while UK companies have traditionally used the basic measure.

The case that has thrown open employer liabilities was brought by a British Gas salesman, who challenged the Big 6 supplier’s policy on holiday pay.

The ECJ ruled that staff that receive part of their earnings in commission should have this taken into account when holiday pay is calculated, rather than just basic pay.

Furthermore under the EU’s Working Time Directive (which had already mandated 4 weeks holiday entitlement) it was ruled that workers had the right to claim for holiday pay and overtime they were ‘owed’ back to 1998 (when the directive was introduced) or to an employee’s start date with the company, whichever was the later.

In their typically myopic and prejudicial way, Unions are rubbing their hands in glee at the opportunity to re-entrench their worth in the psyche of the British worker. The very fact that such claims could easily see businesses go to the wall resulting in mass redundancies doesn’t appear to figure in their cynical protestations of “employee protection”.

Indeed Unite and Unison are actively producing letters ready for submission to employers and fact sheets on how employees can raise their claims.

In their delightfully endearing way the letters point out to the fat cat capitalist Rolls Royce driving person that the average SME owner evidently is, that:

“[You, the SME have an] obligation to pay holiday pay at the same rate as normal pay and specifically which include payments intrinsically linked to the worker’s performance and status”.

This is followed with a letter threatening that:

“Failure to make the payments amounts to an on-going failure to comply with the provisions of the Working Time Regulations 1998 and a series of unlawful deductions from wages”.

EEF, the Manufacturers’ organisation estimates that the ruling will add 4% to the average SME payroll.

Given profit margins and crucially cash flow only need to vary by a small degree to push otherwise healthy businesses into trouble, the impact of this ruling is something that should be of very real concern to every SME.

The news for employees is hardly fantastic either. The days of commission, overtime or other staff benefits may well be numbered for many, either that or the employer ceases to exist altogether.

Another fine mess the EU and Unions have presided over.

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