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Are you Paid Wholly or Partly by Commission?
If so, you may be entitled to more holiday pay as a result of a recent ruling from Europe.
Under the Working Time Regulations 1998, workers in the UK are entitled to 5.6 weeks paid annual leave each year. Whilst on holiday, workers are entitled to be paid at a rate of a week’s pay, calculated by reference to their "normal remuneration".
The Court of Justice of the European Union (CJEU) has recently ruled that the calculation of a week’s holiday pay should not only include basic salary, but also an element to cover commission that a worker would have earned had he been at work.
This important legal development has come about as a result of the case of Lock v British Gas Trading Limited and is likely to affect you if commission payments are directly linked to the work you normally carry out.
Mr Lock was a sales consultant at British Gas. His normal salary included commission based on sales in the previous month; the commission fluctuated from month to month, but still represented on average more than 60 per cent of his pay. Whilst on holiday, Mr Lock obviously wasn’t generating sales commission, which meant that his pay for the following months was always lower than usual. He was therefore financially worse off for exercising his right to take holiday. Mr Lock brought an Employment Tribunal claim for outstanding holiday pay.
The Employment Tribunal asked the CJEU to rule on whether, in such circumstances, the Working Time Directive required commission to be included in holiday pay and, if so, how it should be calculated.
The CJEU concluded that Mr Lock’s holiday pay should include commission because it was directly linked to the work he normally carried out. If not, Mr Lock and other workers in his situation might be put off from exercising the right to annual leave, since they effectively lose income by taking holiday.
The right to paid annual leave is an important principle of European law, the purpose of which is to allow a worker time to rest and enjoy a period of ‘relaxation and leisure’. So it makes perfect sense that the CJEU had to remove any disincentive to workers exercising this right.
As to how the commission-based element of holiday pay should be calculated, this has been left to national courts to decide.
Contact me if you would like further information regarding this legal development regarding commission payments.