Holiday Pay: Commission ruling leads to confusion

The latest European Court of Justice (ECJ) judgment on holiday pay has caused shockwaves amongst employment lawyers assessing the likely impact and implications. The recruitment sector is likely to be one of many industries that are directly affected by the decision.

In Lock v British Gas Trading it was ruled that the commission element of a worker’s pay should be reflected in holiday payments. It was held that otherwise it would disadvantage the worker when taking annual leave and it would be contrary to the Working Time Directive.

Mr Lock was a British Gas sales consultant who was paid a basic salary plus commission which made up to 60% of his take home pay. He claimed that as he could not earn commission whilst on holiday this was a breach of the Working Time Regulations. However, this clearly leads to significant confusion.

Further ambiguity has been created because the ECJ did not give any specific direction as to how holiday pay should be calculated in these circumstances, instead leaving this question for the national courts to assess, where the focus is likely to be on the average commission earned.

Given that commission regularly makes up a significant portion of a recruitment consultant’s pay, the decision is likely to bring about uncertainty and potentially a flood of claims.  This does not only apply to recruitment consultants, but also umbrella companies who often pay workers hourly at the national minimum wage with the remainder of their remuneration as a commission payment.

Until the English tribunals make a ruling as to how the commission should be incorporated into holiday payments, recruiters and umbrella companies may be wise to set aside some contingency or else run the risk of having to find funds to settle the potential multitude of claims.

For more information and advice, contact Lawspeed on 01273 236 236. 

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