ECJ ruling in Lock affects holiday pay for commission-based employees
In ancient Roman myth, Janus was the god of beginnings and transitions, depicted as having two faces, since he looked to the future and to the past. Bringing myth to reality (and with apologies for the tortured metaphor), looking to the future and the past is exactly what the European Court of Justice’s (ECJ’s) decision in Lock v British Gas now requires employers to do. The decision has expensive implications (in a forward-looking sense of future wage bills and in a backwards-looking sense in relation to potentially significant claims) and it’s worth doing the groundwork now.
The ECJ’s finding — that holiday pay must include an element calculated to reflect future commission lost as a result of the employee taking leave — is, without doubt, a game-changer. It is likely to be followed by an Employment Appeal Tribunal (EAT) finding later this year that holiday pay should also include overtime (read on for more detail).
As reported in our January briefing this year, Mr Lock (a sales consultant) had brought a tribunal claim against British Gas for unpaid holiday. Mr Lock was paid a basic salary plus commission (paid in arrears) for sales made in preceding periods and his commission equated to around 60 per cent of his total income. While the pay he received during his holiday included commission from sales made in previous periods, he was obviously unable to make sales (and therefore generate future commission) during his holiday. The effect of him taking holiday, therefore, was that he suffered a reduced income in the period following his return to work…
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