Calculating Holiday Pay: Can Commission to be Taken into Account?

Calculating Holiday Pay: Can Commission to be Taken into Account?

When calculating an employees holiday pay it is often difficult to determine exactly what should be considered as “wages” for this purpose. This is particularly a problem where an employee’s pay includes a basic salary and commission.
In the recent case of ZJR Lock v British Gas in the CJEU Advocate-General Bot sought to provide some guidance on this situation. In his opinion commission should be taken into account when calculating holiday pay.
In this case the employee worked in sales and his pay consisted of both basic pay and commission. The commission payment was based on sales achieved and as such it fluctuated from month to month. He took annual leave for two weeks over Christmas in 2011 and he was not able to make any sales during this period as he was not at work. His employer only took his basic pay into account when calculating his holiday pay for this period.
The previous law in this area came from the Court of Appeal case of Evans v Malley Organisation. It was held that commission does not need to be taken into account when calculating holiday pay. Advocate-General Bot expressly considered this case before making his decision and chose to apply the principle from the case of Williams v British Airways instead.
He recommended that like in Williams the court should find that as payment of commission was intrinsically linked to the performance of the employee’s tasks under his contract of employment it should be taken into account when calculating holiday pay.
He also recommended that it should be left for national courts to decide on a method to determine how much commission it would be appropriate to include.
If the Advocate-General’s opinion is followed by the CJEU which it usually is it would appear that Evans v Malley Organisation should no longer be followed.
This case should hopefully provide some clarity in this matter for employees particularly those in a sales-orientated role who will not suffer by receiving reduced pay during their annual leave.
If you are owed any money by your employer or you believe that you are not being paid correctly for your holiday pay sick pay or maternity pay please contact the dedicated employment team at Michael Lewin Solicitors and we will be happy to discuss this with you.
Written by
Anthony Fox

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