Holiday pay and commission

17th January 2014

Holiday pay and commission

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Commission doesn’t form part of holiday pay. Or does it? An opinion from Europe has set the ball rolling towards resolving conflicting decisions on this.
The case involved a salesman who was paid basic salary and commission. Commission varied from month to month, based on the sales he achieved. When he took a fortnight’s leave (during which time he wasn’t able to make any sales) his employer calculated his holiday pay simply by reference to basic salary.
The Advocate-General’s view (the Advocate-General is a type of preliminary judge in the Court of Justice of the European Union) is that that was the wrong approach. Commission was intrinsically linked to the salesman’s work and so should have been included in the holiday pay calculation. If it wasn’t included, then he could be deterred from taking annual leave.
The European Court usually follows the Advocate-General’s recommendation.  If it does, it will prompt employers to review their approach to remuneration and perhaps alter their pay structures. The UK courts would then be required to decide how the commission element of holiday pay should be calculated, but it could be based on an average yearly commission.
This is important for anybody who pays commission.  We’ll report again when the European Court of Justice decides the case.

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