Edwin Coe Employment Blog – We’re all going on a Summer Holiday…and being paid Commission.

In the latest judgment from a string of cases from the European Court of Justice (ECJ) concerning workers and their holiday pay, the case of British Gas v Lock confirms that a worker’s holiday pay must include commission.

In this case, a sales consultant for British Gas was paid a basic salary plus commission on a monthly basis. The commission fluctuated based on sales but in general made up about 60% of his wages. When he was on holiday, he was only paid his basic salary. He therefore brought a claim asserting that his holiday pay should be calculated using basic pay plus commission he would have earned had he not been on holiday.

The tribunal referred the case to the ECJ to ask whether:

the individual should be entitled to commission pay whilst on annual leave and
if so, how this should be calculated?

The ECJ made references to various cases which cite the importance of annual leave and the right to receive payment during annual leave of an amount which is comparable to a period of work. The reasoning of the ECJ is that if a worker was not remunerated in this way, they would be deterred from taking annual leave, which would be incompatible with Article 7 of the EU Working Time Directive, which is implemented in the UK. The ECJ confirmed that holiday pay should include commission but gave no guidance on how that should be calculated.

This has far reaching implications for employers who should pay holiday to include commission although what calculation they should use remains to be clarified. There is also the potential for backdated claims of underpayment for holiday.

This echoes many of the concerns for employers from the case of Neal v Freightliner which held that overtime (whether voluntary or not) should be included when calculating holiday pay, which we reported back in September 2013. However, a slight comfort to employers is that the case of Neal v Freightliner, along with another case on the same issue, is the subject of an appeal which will be heard in July 2014. We will keep you updated with the outcome.

If you would like further information on this topic please contact the Edwin Coe Employment Team.

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