The ECJ has held in Lock v British Gas Trading Ltd that commission should be included in holiday pay as under the Working Time Directive ("WTD") a worker is entitled to receive their "normal remuneration" and should not suffer any financial disadvantage which would discourage him/her from taking holiday. Mr Lock was paid a basic salary plus commission determined by his contract related to sales generated which made up 60% of his total remuneration. When he took annual leave he suffered a reduction in income which reflected the fact that he was not able to generate sales while on holiday. The Court found that as Mr Lock's commission payments were directly and intrinsically linked to the performance of tasks he was required to carry out under his employment contract it should be paid in respect of holiday. However, the ECJ left it for the national court or tribunal to decide how the commission element of holiday pay should be calculated.
Key Points
- The tribunal will now have to decide whether the WTR can be interpreted in line with the ECJ's decision to include commission payments in a "week's pay" and how payment for commission should be calculated. The Advocate General suggested a reference period of 12 months although under the Working Time Regulations ("WTR") the reference period is 12 weeks.
- As a result of this decision it is likely that other forms of remuneration which are intrinsically linked to the employment contract could be included in holiday pay. If so, this will impact on the financial services sector as firms are increasingly paying employees allowances in response to the EU cap on bonuses which may now need to be included.
- There also remains open the issue of whether there may be significant liability for backdated pay and also, whether this applies to the 4 weeks annual leave under the Directive or 5.6 weeks under the WTR.
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