Workers whose total pay package relies heavily on commission will have this reflected in their holiday pay, following a ruling in favour of an employee in a tribunal.
In the case of Lock vs. British Gas Ltd. and others, the Court of Justice for the European Union (CJEU) ruled that the employer must take into account Mr Lock's full remuneration package, including commission, when calculating holiday pay.
Lock was represented by Unison in the case against British Gas. Unison general secretary Dave Prentis hailed the ruling as "extremely important".
"This will assist workers across the European Union to argue that they should be entitled to their normal pay, including any commission payments they normally receive, for periods of annual leave," he said.
Ben Gorner, employment partner at DLA Piper said the ruling could put companies under serious financial pressures, especially SMEs. "People can backdate their claims, in some instances by up to 10 years," he said. "For a small company with several employees who have worked on commission for some time, this could spell serious trouble."
Brief details of the case
Mr Lock is a sales consultant for British Gas receiving a basic salary and variable commission on a monthly basis. His commission makes up about 60% of his pay. The amount of commission varies depending on the number and type of sales he achieves, paid at the time the sales contract is entered into and not when Mr Lock actually carries out the work to achieve the sale.Mr Lock took holiday from 19 December 2011 to 3 January 2012 during which time he was paid basic pay and the commission he had earned on sales contracts entered into in the previous weeks. However, as he did no work during his holiday, he did not generate any sales and therefore his salary was lower in the months following him taking holiday as he received no commission, and therefore he "lost" income by taking his holiday. Mr Lock brought a claim for his "lost" holiday pay in the Employment Tribunal. The question of whether commission should be included in holiday pay and, if so, how this should be calculated, was referred to the Court of Justice of the European Union ("CJEU") by the Employment Tribunal.
The CJEU has now confirmed that the holiday pay required under the Directive is to enable a worker to actually take the leave to which he is entitled, and that commission such as that received by Mr Lock should be included in the calculation of holiday pay, since it is directly linked to the work he normally carries out. Although the amount of Mr Lock's commission varies on a monthly basis, it is nevertheless permanent enough to be regarded as part of his normal monthly pay. However, the Court has left it to Member States to decide on how that holiday pay should be calculated.
Will this make a big difference to how you take time off? Will it make it easier for you to take annual leave knowing you are not going to be financially worse off the following months? Kubo would love to know your thoughts on this!
