Addleshaw Goddard

UK 200 2013 position: 23

ECJ decides holiday pay must be calculated to include sales-based commission payments

The ECJ has held that where a worker is paid by way of basic salary and regular sales commission such commission must also be included in the calculation of holiday pay (Lock v British Gas Trading Limited).

The European Working Time Directive (WTD) provides that workers have the right to paid annual leave. While the WTD does not specify how such payments are to be calculated, our domestic Working Time Regulations 1998 (WTR) provide that workers will be paid at the rate of a ‘week’s pay’ for each week of leave (which is calculated in accordance with ss. 221–224 of the Employment Rights Act 1996).

A continuing area of uncertainty has been how variable components of pay should be treated for the purposes of calculating holiday pay. Previous domestic case law had established that workers who earned a basic salary plus additional sales-based commission were only entitled to holiday pay based upon their basic salary. However, a later decision of the ECJ held that workers should receive their ‘normal remuneration’ while on holiday and this includes any variable remuneration payments that are ‘intrinsically linked’ to the performance of the tasks which a worker is contractually required to perform…

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