In the case of Lock vs. British Gas Ltd. and others, the Court of Justice for the European Union (CJEU) ruled that the employer must take into account Mr Lock's full remuneration package, including commission, when calculating holiday pay.
Lock was represented by Unison in the case against British Gas. Unison general secretary Dave Prentis hailed the ruling as "extremely important".
"This will assist workers across the European Union to argue that they should be entitled to their normal pay, including any commission payments they normally receive, for periods of annual leave," he said.
Ben Gorner, employment partner at DLA Piper told HR magazine the ruling could put companies under serious financial pressures, especially SMEs.
"People can backdate their claims, in some instances by up to 10 years," he said. "For a small company with several employees who have worked on commission for some time, this could spell serious trouble."
Gorner added that the Government may attempt to use its powers to limit the period of time claims can stretch back, in line with recent attempts to aid small business.
Trowers and Hamlins employment partner Rebecca McGuirk added it was clear the old rules did not align with the directive of "a week's pay for a week's leave".
"As long as there is an intrinsic link between the various components making up the total remuneration of the worker and task he is required to carry out, these components must be included in any holiday pay calculation," she said.
