Holiday pay should include commission payments

The Employment Court has held that when an employer is making payments of holiday pay to a staff member whose pay is made up of a regular weekly pay plus commissions that holiday pay should be based both on the regular weekly pay and any commissions paid.

The two employees who brought the claim and worked for that company for 20 and 15 years respectively and their holiday pay had been incorrectly paid for almost all of that period.  The holiday pay had been based only on their weekly base earnings and had ignored the substantial commissions they had earned every month over those many years. 

Normally there would be a six year time limit on claiming back pay but in this case the company had through its actions agreed to pay the employees the incorrect pay dating back to when they commenced employment.  The company was therefore liable for 20 years and 15 years back pay on the incorrect holiday pay.

If you have been paying holiday pay based only on base salary then you will need to arrange to pay the back pay to employees. 

If you have been receiving holiday pay which has been incorrectly calculated only on your base salary and excluding commissions then you should talk to your employer about receiving the difference between what you were paid and the correct calculation.

Alan Knowsley
Employment Lawyer
Wellington