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28-05-2014

The Court of Justice of the European Union (ECJ) has held that commission should be included in the calculation of holiday pay in addition to basic salary. See Lock v British Gas Trading Limited.

Pay whilst on holiday should include an amount to reflect commission that would have been earned, if the employee had not taken holiday leave. The key principle is that employees should not be worse off because they have taken holiday.  If they are, the risk is that employees will not take holiday leave at all, which would be contrary to the intention of the working time directive.

It is still questionable as to how the commission element in respect of a period of holiday should be calculated. The Advocate General's view was that taking an average amount received by the employee over a representative period  of the previous 12 months, would be appropriate. However, this is for national courts to determine.  The upshot of the decision is that a number of businesses may now face a liability for retrospective un paid holiday pay.

Sarah Rushton (srushton@moonbeever.com)

This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information.

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