The ECJ rules that holiday pay should include commission

Following the recent Lock v British Gas case, the European Court of Justice (ECJ) has ruled that if an employee’s commission is linked to the number of sales made whilst at work, then any holiday pay must reflect that. Without this assurance in place, it is said that workers will be put off taking holiday.

Lock, a sales consultant at British Gas, won the case against the employer on the basis that 60% of his pay is made up of commission, with the remaining 40% coming from his basic salary.

Although he was paid commission for the sales made before his annual leave which fell during his time off, he wasn’t paid any commission for the period the holiday covered, forcing him to suffer financially in the months to follow.

The ECJ was asked to evaluate the case in line with other countries within the EU. The result was a ruling in favour of any worker heavily reliant on commission as a regular part of their salary, to receive appropriate holiday pay to safeguard against a feeling of being unable to take annual leave.

Such a ruling has forced companies to relook at their holiday policy to ensure that employees are able to take annual leave without this impinging on their financial stability.

This opens up a potentially difficult area for employers, as, by nature, commission tends to fluctuate from period to period. At the very least, it may lead to a wave of revamped commission schemes in order to combat this potential problem as sales-led companies and smaller businesses struggle with this additional expense.