Expert opinion: Decision made on holiday pay for workers on commission
Back in February, the European Court of Justice was asked to assess whether holiday pay must now contain rolled-up commission payments to compensate for the employee’s inability to earn commission during the period of leave.
The case – Lock v British Gas – has now been decided by the ECJ. It ruled that employers must, during a period of annual leave, pay employees the commission that they would have earned had they not been on leave.
The reasoning is that employees should not be financially penalised because they are on leave and should not be deterred from taking holiday for financial reasons.
As we predicted, holiday pay for workers who regularly earn commission in addition to their basic salary must now include:
- Basic salary
- Any commission falling due for payment while the worker is on holiday
- Pay for the commission that the employee would have earned had they worked during their period of leave
One issue is unclear. The ECJ did not decide how employers should calculate holiday pay and has left this for national courts to decide.
It remains to be seen how the tribunal looking at this case will calculate the loss of commission – this will be decided in the near future, and could be the subject of further appeals.
The tribunal will have to consider whether, say, a 12 month average of previous commission payments would be appropriate, or whether – as for many other employment law provisions – 12 weeks.
We recommend that if your employees earn commission, you consider including commission into holiday pay. If not, employees may be able to take legal claims, for example for loss of wages or constructive unfair dismissal.
Richard White is a partner at Withy King solicitors specialising in employment law. Contact him on 01225 730 172 or at Richard.White@withyking.co.uk