Holiday Pay: Should it include commission?

For a lot of employees in a sales related job they will only be on a basic level of pay which is supplemented by commission. Normally this isn’t a problem as as long as you are doing your job you should be getting your commission payments to top up your basic. A problem can arise however when holiday pay is brought into the mix. It has been fairly standard that holiday pay will not include commission however  this may be about to change.

Lock v British Gas

Unison have brought a case which has been referred to the Court of Justice of the European Union which hopes to shake things up with regard to holiday pay. This is the case of Lock v British Gas. In this case the Claimant worked as an internal energy sales consultant and more than 50% of what he earned was through commission.This meant that he hardly ever took annual leave as his income would drop significantly.

Following a holiday he did take, he went on to make a claim stating that he believed he was owed the average amount of commission he would have earned had he not been on holiday. This case has now been considered by the Advocate General and will now be put to the full court.

The Advocate General has come out in favour of the Claimant. Saying that employers should take into account the average commission earned when calculating holiday pay.

The Advocate General stated:

“the commission in question is directly linked to the work normally carried out by Mr Lock under his contract of employment…it constitutes a constant component of his remuneration. A consultant who carries out his tasks satisfactorily within British Gas will receive commission each month in addition to his basic pay.

In my view, failure to take commission into account in the remuneration that is payable to a worker in respect of his paid annual leave is capable of deterring him from exercising his right to such leave, which is contrary to the objective of Article 7 of Directive 2003/88 (the Working Time Directive)”

Although the decision of the Advocate General is not binding the Full Court generally follow the decision of the Advocate General. If it does follow this decision, holiday pay could increase quite considerably.

What next?

If you work primarily on a commission basis and you are not receiving an average of it included in your holiday pay you might be able to claim the unpaid holiday. Please do not hesitate to contact us on [phonenumber] where one of our professional team will be able to discuss your situation and advise you on the feasibility of taking it forward on a no win no fee basis.