The European Court of Justice (ECJ) released its decision today in the case of British Gas v Lock. This decision could have far reaching financial consequences for employers who pay commission to workers as part of their remuneration package.
Mr Lock was a salesman for British Gas who received basic pay and variable commission payments. Mr Lock's commission was calculated by reference to sales achieved. When Mr Lock was on annual leave he only received basic pay he did not consider this fair and he brought a claim in the employment tribunal for his "lost" holiday pay.
This case was referred to the ECJ and its decision today was that the commission received by Mr Lock was directly linked to his work and consequently where a worker's pay consists of basic salary and commission the worker should not be financially worse off as a result of taking annual leave.
This decision will have huge financial implications for employers who do not currently take commission into account when calculating holiday pay due to an employee. Employers could be faced with claims for unpaid holiday pay spanning several years and they will also have to review their contractual leave arrangements to ensure that commission payments are factored into the holiday pay going forward.
Unfortunately the headache for employers does not end there – this decision deals only with the calculation of commission and holiday pay. The Employment Appeal tribunal will decide on two other cases in July dealing with the question of whether overtime should also be included in the calculation of holiday pay.