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Should Holiday Pay include Commission?


by Laura Davies | 9 June 2014

As recruitment consultants, a pivotal part of our role is sales and commission based. I was therefore very interested in a recent article on Personnel Today covering a recent European Court of Justice Case relating to holiday pay and commission.

I was surprised to find that the ECJ has ruled that employers must include commission in holiday pay!

The decision in the case Lock v British Gas means that any worker whose pay is recognised fully or partially in commission should be entitled to have this reflected in their holiday pay. Besides the obvious negative to sales based employers, resulting in a higher holiday pay cost for them, there are the added difficulties of complex holiday pay calculations, and the risk of employees who bill large sales aking advantage of a bigger holiday pot...

It was found in the case that the claimant's commission was directly linked to the work he carried out - as it is in most sales based jobs - and therefore commission must be taken into account when calculating holiday pay. Regardless of commission payments fluctuating, if an employee has a permanent enough commission for it to be regarded as forming a normal part of his pay, then the courts have ruled this must form part of holiday entitlements.

What this means in practice is not yet clear, and it will be very interesting to wait and see what the impact is on sales roles moving forward. For me, commission is an added benefit on top of annual remuneration and other benefits; but take a look at the case here and let me know your thoughts in the comments below.