commission-holiday-pay

The European Court of Justice has good news for employees, as it has been determined that commissions that might have been earned should also be reflected in holiday pay.

In the case of Lock v British Gas Trading Ltd, Lock was awarded not only his basic salary but also the sales commissions achieved. These commissions were paid quite some time after the sale, consisting of around 60% of his remuneration.

The holiday was taken from December 19, 2011, through January 3, 2012, and Lock received his salary as well as the commission for that time frame. In the following months, Lock experienced a significantly reduced income due to the fact he had been paid no commission for the time he spent while on holiday.

It was at this time that Lock filed a claim with the employment tribunal. The tribunal acknowledged that the lesser commission was caused by taking the yearly leave, and questioned whether the Working Time Directive requiring employees to be provided with four or more weeks of paid leave had been upheld.

It was determined by the Advocate-General that Lock’s arrangement had not complied with the Working Time Directive. The ECJ agreed in Lock’s favour that according to the Working Time Directive, workers should receive ‘normal remuneration’ during their annual leave. Normal remuneration includes money earned from tasks taken into consideration within the employment contract.

It was determined that Lock had, in fact, suffered a financial disadvantage after taking his holiday, as he had not been able to earn commission during his vacation. Because such a financial disadvantage would prevent workers from taking their holidays, the current arrangement did not support the purpose of the Working Time Directive.

Because Lock’s commission amount was directly linked to his job duties outlined in his employment contract, it had to be included in his holiday pay calculation. Furthermore, it was irrelevant that the reduction appeared well after his holiday had ended.

The national court’s job would be to establish the calculation to be used when including commission based on the Directives and ECJ case law. The tribunal would be asked to determine the earned commission average within the specific reference time. This average would represent national law.

Because UK provisions have excluded commission from holiday pay calculations, the employment tribunal may attempt to interpret UK law to further reinforce the ECJ’s decision. The tribunal may also require British Gas to foot the bill for Lock’s additional commission.

The twelve weeks prior to holiday will be used to find the average commission needed to calculate the new holiday pay rates. The inclusion of overtime in holiday pay will be considered by the tribunal in late July.

In the meantime, employers are urged to quickly revisit their holiday pay policies to ensure proper payment for their workers. It is expected that employers will soon face holiday pay claims that date back several years. For additional inquiries and advice on this topic, please contact Roselyn Borg Knight on 01732 617994.

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