Warning – Holiday Pay must include commission!

The European Court of Justice (ECJ), in the case of British Gas v Lock, has held that holiday pay should not be limited to basic salary when the worker also earned commission as part of his/her remuneration.

British Gas v Lock was a case concerning a salesman (Mr Lock) on a basic salary with variable commission which was paid in arrears. Mr Lock’s commission depended on the outcome of the work he undertook, i.e. the amount of sales he achieved. As such Mr Lock could not earn commission whilst on holiday and consequently would be financially worse off by taking it. He brought an employment tribunal claim for his ‘lost’ holiday pay as a result of taking holiday over December and January 2011.

The ECJ confirmed that holiday pay should not be limited to basic salary when the worker also earned commission as part of his/her remuneration.

This case endorses the notion that where a worker’s remuneration consists of a basic salary and other variable elements directly linked to work (i.e. commission), then holiday pay should be paid on the basis that a worker receives pay that is comparable to his or her usual pay.

Employers should review their holiday pay policies to ensure that any commission or similar types of payments are included in the holiday pay paid to their workers. A failure to do this may result in the worker bringing an Employment Tribunal claim against his or her employer for the ‘lost’ pay, as Mr Lock did in the case explained above.

For more information on how this case may affect your business, please contact a member of our Employment team.

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