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Holiday Pay and Commission

Should I receive holiday pay including commission?

The law surrounding holiday pay and what should be included in its calculation is in a state of flux. On 22 May 2014 the European Court of Justice (ECJ), in Lock v British Gas Trading Ltd, decided Mr Lock should have commission he was paid included in the calculation of his holiday pay under the Working Time Regulations.

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Summary of the decision

Mr L was employed by British Gas as an Internal Energy Sales Consultant. He was paid a basic salary and commission based on the sales he made. His commission represented, on average, over 60% of his take home pay.

British Gas paid holiday pay to Mr L based on his basic salary only. During any holiday Mr L was also paid commission he had earned prior to the holiday period. In the weeks and months after the period of holiday Mr L only received basic salary and not commission as Mr L was not at work during the holiday and did not make sales to generate future commission.

Mr L claimed his 28 days statutory holiday pay should be calculated to include basic salary and average commission. The ECJ agreed.

I receive commission. What next?

This is a very significant case but the ramifications are not yet clear because of how European law takes effect here.

Firstly you need to decide if this decision applies to your organisation’s commission scheme and whether you may be entitled to an increase in your holiday pay. This case may apply if you are paid commission based on your own sales or performance.

The next stage depends on whether you work for or are employed by a private organisation or public body.

I work for a private organisation

You should not expect a private organisation to start calculating holiday pay including commission straightaway. Why? Because, the decision has to be considered by the Leeds Employment Tribunal (who referred the case to the ECJ) and they will decide how to interpret the decision and give effect to it in England and Wales.

To complicate things this may not be the end of it. The decision could be appealed or the Employment Tribunal could decide that the government has to amend the Working Time Regulations to give effect to the decision.

I work for a public body

If you work for a public body, your situation is very different. The decision applies now and this means that public bodies should have already started to calculate your holiday pay to include commission (or at the very least be planning to). 

Holiday pay and overtime

We are expecting further developments on calculating holiday pay when the Employment Appeal Tribunal decides if holiday pay should include overtime. This decision is expected between October and December. If this case is decided as we expect it to be you may be entitled to holiday pay including overtime as well. We will be updating our website when this decision is known.

How Quantrills can help you

Certain time limits apply for you to bring claims for payment of holiday. You should not delay. One of our specialist employment law solicitors will:

  • Advise you on what holiday pay you are entitled to going forward;
  • Consider if you have a claim for holiday pay already paid but which did not include overtime (a claim for backdated holiday pay);
  • Discuss how to approach your employer to find out what they are planning to do about the decision;
  • Consider what your employer could do to limit what it may have to pay and how you can protect your position.

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