24 April 2014

Holiday Pay: Where's my commission?!

Holiday pay: employers are sometimes reluctant to pay it and employees are almost always militant in asserting their statutory right to receive it. In many sales roles in the UK however there has long been the sense from the employee side of the argument that commission, which can often form the majority of a salesperson's remuneration package, should be factored into the holiday pay calculations undertaken by payroll.

Recently the question was referred from Leicester Employment Tribunal ("LET") to the Advocate General ("AG") of the European Court of Justice ("CJEU") for a preliminary ruling on whether the granting of commission in a claim for holiday pay would be compatible with EU Law.

The referred case of ZJR Lock v British Gas concerned a salesman, Mr Lock, whose pay was split into basic salary and commission. The commission was naturally based on the number of sales achieved which varied each month. Mr Lock had taken two weeks annual leave in December 2011 and so was not able to conclude any sales during that time. When it came for his holiday pay calculation to be made, his employer only took his basic salary into account.

The AG recommended that LET find that as commission was intrinsically linked to the performance of the tasks Mr Lock was required to carry out under his contract of employment, it must necessarily be taken into account in calculating his holiday pay. The AG also recommended that it should be left for each nation's courts to decide on the relative mechanism for determining the appropriate amount of commission to include when calculating holiday pay.

The AG had rendered his ruling having specifically considered the prior law espoused in the Court of Appeal decision in Evans v Malley Organisation, in which it was held that the opposite was the correct approach and commission does not need to be taken into account when working out an employee' holiday pay.

Conclusion
This opinion has quite wide ranging consequences if followed in future by the CJEU, which has a binding effect on lower courts, including those in the UK. The general position recently has been for the opinion of the AG to be adopted by the CJEU. Should this be the case in this instance then clearly the days of holiday pay pertaining solely to the basic salary of employees may be numbered.

The effect of such an occurrence will obviously be felt throughout UK industries that employ a sales component in their businesses, naturally the printing industry would fall within this category along with many others.