Paying commission during holiday

17 July 2014 | David Widdowson

The recent case of Lock v British Gas Trading Limited has caused concern amongst employers.

The European Court of Justice (ECJ) decided that Mr Lock’s holiday pay should include a sum in lieu of the commission that he might have received had he not been on holiday.  The rationale for the decision was that the inability to earn commission while on holiday may discourage an employee from taking his or her annual entitlement to holiday.

Although Mr Lock did actually receive commission when he was on his holiday, it was a pay out for commission earned in previous weeks.  His forthcoming pay packages were likely to be reduced as a result of his holiday absence (and therefore failure to earn commission).

What should UK employers do next?

1. Wait and see.  The UK courts now need to consider the decision as the case will return to the UK employment tribunals.  It is likely that the UK tribunal will consider that the ECJ’s decision is compatible with the relevant UK regulations.  However, the court will need to decide what period of time employers should take into account when determining commission pay during periods of holiday.  The current suggestions are either an average of a 12 month period (based on ECJ case law) or an average of a 12 week period (based on the requisite 12 week reference period for calculating ‘a week’s pay’ under UK law).

2. Start thinking about amending commission and holiday policies.  It may be sensible to await this summer’s anticipated appeal decision in the UK courts as to whether voluntary overtime forms part of a worker’s usual remuneration and as such should be included in holiday pay.


Lock v British Gas Trading Limited

Neal v Freightliner Ltd ET/1315342/12

For further information or to discuss the issues raised, please get in touch.


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David Widdowson
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