News & Views

Holiday pay MUST include commission

BY Sarah Mennie
Employment law
BG Purple

In the recent case of in British Gas v Lock the European Court of Justice held that under the Working Time Directive a worker’s statutory holiday pay must not be limited to basic salary where commission is paid.

The Claimant, Mr Lock, was engaged on a base salary but was entitled to performance related commission. The commission was directly related to sales achieved and at times constituted more than half his salary. Whilst he was on leave and not making any sales he was therefore not entitled to earn commission. The Claimant raised a claim on the basis that he had lost income by taking annual leave.

The Employment Tribunal referred to the ECJ asking whether holiday pay should take into account commission that would have been earned had the worker been at work and if so how this should be calculated.

The ECJ held that by not including commission in the calculation of holiday pay workers would be discouraged from taking annual leave and was thus unlawful under the Working Time Directive.  The question of how holiday pay should be calculated to include commission was left to member states however.

We would recommend that you look to review your policies on holiday pay for those employees who are remunerated through commission schemes and contact your Legal Manager for further guidance.

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