Should holiday pay be calculated to include sales-based commission payments?
The advocate-general has issued an opinion on how to calculate the holiday pay of employees who are paid by way of basic salary plus regular sales commission.
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).
One area of uncertainty, however, is 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 European Court of Justice (ECJ) had held that workers should receive their ‘normal remuneration’ while on holiday and this will include any variable remuneration payments that are ‘intrinsically linked’ to the performance of the tasks a worker is contractually required to perform…
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