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Holiday pay should include commission
A case which has been running through the UK Courts and has now reached the ECJ, Lock v British Gas Trading Limited and others (about which the Advocate General’s Opinion was reported in the December 2013 edition of the Update), has now had judgment delivered by the ECJ. In short, it follows the Advocate General’s Opinion that, where a worker’s pay normally includes commission, and their remuneration has, as an integral part of it, a commission element, the figure used for calculating their holiday pay should be their full remuneration including commission and not reduced to the basic pay element. It found that the worker only received basic pay for taking holidays in circumstances where their normal remuneration included a significant amount of commission. Since they would therefore be significantly worse off if they took holiday, it was likely to deter them from exercising their right to annual leave. It also held that the fact that the reduction occurs after the period of annual leave is irrelevant.
In this case, the Claimant was a sales agent whose commission normally made up around 60% of her pay, albeit that it fluctuated. If the Claimant took leave, the month following his return from leave was necessarily a lower monthly payment because of absence. In upholding the Advocate General’s Opinion, the ECJ has potentially created a difficult situation for a number of employers whose staff remuneration is comprised primarily of commission payments. This is an important point which must be taken into consideration when dealing with payment of holiday pay in all situations where the remuneration has, as an integral part of it, an element of commission.
This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.
For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.
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