Should the statutory holiday pay include an element for commission, even though this is not allowed under the Employment Rights Act 1996?
Yes, according to the European Court of Justice, in the case of Lock-v- British Gas.
In this case English legislation meant that the British Gas salesman (who earned 60% of his remuneration in commission) was not able to have his commission taken into account in his holiday pay. British Gas argued that this had already been taken into account in the amount of commission he was getting.
However, the European Court has held that, contrary to British law, workers should be paid their ‘normal remuneration’ while on annual leave, and that this should include an element for commission. It was also relevant that the commission was intrinsically linked to Mr Lock’s work.
Implications for businesses
This will have significant and far reaching implications for businesses who pay commission, but do not pay this when their workers are on annual leave. They should consider doing so now.
The Tribunal who initially had this case will now need to decide how to calculate the amount of commission, and this will be of particular interest.
In the previous round at the European Court, the Advocate General had indicated that it may be possible for the employer to argue that the holiday payments were ‘rolled up’ with the commission already paid. This point was not considered in the recent judgement, and will be particularly interesting when the case gets back to the UK Tribunal, because it may be open to businesses who amend their commission documents to make it clear that holiday commission is ‘rolled up’ with normal commission.
So, as ever, we will need to see how the case progresses, but the position is currently that holiday pay should include an element for commission.