Holiday pay has to include commission

In a truly landmark decision in the case of Lock v British Gas [2014] IRLR 648, the European Court of Justice decided that holiday pay under the Working Time Directive has to include commission if salary is made up of commission. Mr Lock was a sales person working for British Gas who had a basic salary and received commission in arrears for sales achieved. When he took leave, he was paid only basic salary, and did not earn any commission (because he wasn’t actually selling). The European court found that this effectively deterred him from taking holiday, and therefore the UK Working Time Regulations did not properly implement the EU Working Time Directive.

The ruling means that millions of workers may not have been paid their full entitlement to holiday pay, going back years. This could mean that they have a claim for unpaid holiday pay in the employment tribunal or breach of contract in the county court. There are different time limits for such claims and therefore any employee or worker seeking to recover unpaid holiday pay will need to act quickly.

The ruling rewrites established practice across many sectors, where only basic pay excluding commission is paid during holiday. Employers will need to consider the extent of their historic liabilities and take immediate steps to review their practice so that they do not continue to underpay workers during holiday…

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