Holiday Pay has to Include Commission

Thu, 17 Jul 2014

In a truly landmark decision in the case of Lock v British Gas [2014] IRLR 648 the European Court of Justice decided that holiday pay under the Working Time Directive has to include commission if salary is made up of commission. Mr Lock was a sales person working for British Gas who had a basic salary and received commission in arrears for sales achieved. When he took leave, he was paid only basic salary, and did not earn any commission (because he wasn’t actually selling). The European Court found that this effectively deterred him from taking holiday, and therefore the UK Working Time Regulations did not properly implement the EU Working Time Directive.   

What does this mean for workers and employees?

The ruling means that millions of workers may not have been paid their full entitlement to holiday pay, going back years. This could mean that they have a claim for unpaid holiday pay in the Employment Tribunal or breach of contract in the County Court. There are different time limits for such claims and therefore any employee or worker seeking to recover unpaid holiday pay will need to act quickly.

What does this mean for employers?

The ruling re-writes established practice across many sectors, where only basic pay excluding commission is paid during holiday. Employers will need to consider the extent of their historic liabilities, and take immediate steps to review their practice so that they do not continue to underpay workers during holiday.  

What to do next?

Some commentators have said that this is a “ticking time bomb” for employers. Whether you are a worker or an employer, you will need to act quickly to best protect your position.

Whether you are an employee looking to bring a claim, or an employer looking to defend a claim and review your practices to be compliant with the law, we can find the right employment barrister for you under direct/public access rules to advise and represent you. Please contact us on [email protected] or call 0845 210 5555.     

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