Lawyers warn holiday pay may have to include commission

Legal developments on holiday pay could affect employers in industries such as recruitment, where commission payments are the norm, and lead to millions of claims, a lawyer has said.

Wed, 10 Sep 2014 | By Nicola SullivanLegal developments on holiday pay could affect employers in industries such as recruitment, where commission payments are the norm, and lead to millions of claims, a lawyer has said.

Speaking this morning [10 September] at an event hosted by law firm Gordon Dadds, partner Martin Pratt warned that recent European court judgements could result in back pay for “literally millions of workers”, which, in some cases, could date back as far as 16 years to 1998 when the Working Time Directive was enforced. The directive, which entitles workers to 5.6 weeks annual leave, suggests that someone not taking holiday is a health & safety issue.  

Pratt referred to the case of Lock vs British Gas Trading Ltd, which followed a claim made by an energy adviser after he took a two-week holiday between 19 December 2011 and 3 January 2012. During this time he was only paid his basic salary and not his sales commission, which would normally make up a large part of his total remuneration.

After a UK employment tribunal presented “two competing authorities”, the case was passed over to European Court of Justice, which decided that the claimant’s sales commission was directly and intrinsically linked to the performance of the tasks of his job and therefore should be included in his holiday pay.

“Because Lock wasn’t able to generate commission while he was on holiday this led to him having a financial disadvantage. As a result of that financial disadvantage he was disincentivised to take holiday,” said Pratt.

The original employment tribunal is currently deciding on the ECJ’s ruling.
“We are waiting for that judgement but from [this case] and other cases we can extrapolate a number of things,” said Pratt.

He advised that compulsory overtime, commission (linked to the performance of the workers’ contract), standby and on call payments should be included in holiday pay. “Bonuses are going to be an enormously tricky one,” he warned.

“If somebody takes holiday during the annual reference period for an annual bonus there is a chance that someone who hasn’t taken holiday will get more of a bonus because they have performed better as a result of not taking holiday.”

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