BUSINESSES face huge extra costs because of possible changes to the way holiday pay is calculated, a leading employers' group has said.

The CBI said a ruling by the European Court of Justice could lead to holiday pay being re-defined to include a commission allowance.

The business group said "legal goalposts" were being moved, which could lead to "back-door" employment law.

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Katja Hall, CBI deputy director general, said: "Backdated claims on holiday pay could lead to bills of millions of pounds for each business, and ultimately threaten their very existence.

"Businesses that have done the right thing and fully complied with UK law suddenly face the threat of substantial additional costs.

"The companies most at risk are in vital sectors for our economy, such as manufacturing, construction and civil engineering.

"Although most businesses believe we are better off in a reformed EU, there is a real danger of expansive decisions being made by the European Court of Justice on the UK labour market.

"As part of an EU reform programme, this has to be addressed and it's time to put a stop to back-door EU employment law being made.

"We need the UK Government to take a strong stand and do all it can to remove this threat.

"Otherwise we face the very real prospect of successful firms in this country going out of business, with the jobs they provide going too."