Holiday Pay and Commission Calculations
Anyone employing people working fixed hours and being paid additional commission will be interested in Lock -v- British Gas and others as everyone packs for their holidays.
In the Lock case the claim is that, as his income consisted of salary and substantial commission payments, he was unfairly financially penalised when taking holidays during which no commission could be earned.
Because of the circumstances, the Court of Justice in the European Union (CJEU) decided that the commission element of the income was sufficient to be included in calculations for holiday pay.
Commission is now to be included for calculations of holiday pay for employees on fixed-hours contracts. British Gas offered that their rate of commission reflected the potential for loss of earnings during holidays, but this position was deemed unsustainable by the CJEU.
To make matters slightly more complicated (as if they weren’t already complicated enough) the payment of what is effectively compensation for lost commission should only be made in respect of holiday entitlement under EU legislation. Payment is not due during periods of additional holiday covered by the terms of the employment contract.
Employers should already be studying their figures, as well as the commission agreements and employment contracts that they have in place, as there is potential for claims for back-pay as a result of this decision.
There is potential here for staffing level reviews to be necessary in some businesses as the additional financial burden could swing a struggling business into the financial danger zone
For help and advice in determining your position as a result of this decision please contact us.