Holiday pay and commission

The European Court of Justice has ruled that employers must include commission in holiday pay.

The case on which they were ruling (Lock v British Gas) concerned an employee whose income was made up of a basic salary plus commission based on the sales he made. This made up about 6% of his total pay.

When he took holiday he obviously did not make any sales and so did not receive commission. This affected his salary in the months following and so he bought a claim to the tribunal for the outstanding commission-based holiday pay to which he believed he was entitled.

The ECJ agreed with the employee but will be leaving it up to member countries to decide how their ruling should be implemented.

Employers will need to take warning of this ruling and look again at their commission based staff and how their holiday pay is calculated. It will be complicated and needs serious thought. They will need to be careful if considering average commission periods - for example if a member of staff has had a particularly good month, and commission is based on recent averages, it could theoretically increase the level of holiday pay due.

If you have any questions on your holiday pay policies or would like to discuss possible schemes, please contact one of our employment law team.Holiday pay and commission