European Court of Justice Rules on Holiday Leave
24 June 2014 by Lawrence Adams
The European Court of Justice has recently held that an employee was entitled to a payment on account of commission when taking Holiday Leave.
The case, British Gas v Lock, had been referred to the European Court of Justice by the Employment Tribunal. The employee had worked as a salesman earning a basic salary and a commission on top which depended upon the outcome of his work.
The European Court of Justice was asked to answer two questions; 1) in calculating holiday pay, must Member States take measures to ensure that a worker is paid by reference to commission payments that the worker would have earned if at work; and, 2) how to work out that holiday pay.
The European Court of Justice found that Member States did need to take these measures. However, they did not provide any guidance on how the courts should calculate the appropriate amount, instead finding that national courts should be free to determine this within the limits imposed by EU directives and regulations.
As a result of the judgment, it is now clear that where an employee is entitled to a basic salary and to variable remuneration on top of this, Holiday Pay must reflect both elements of remuneration and be comparable to the normal pay.
Employers should now assess their procedure for paying Holiday Pay where their staff are paid with an element of variable remuneration on top of their basic pay. Similarly, employees should make their employers aware of these obligations. It seems likely that the government will update the law to reflect this judgment; but we anticipate this could take a while to come onto the statute book.