News - UK

UK - July 2014

Paying commission during holiday

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.

Resources

Lock v British Gas Trading Limited

Neal v Freightliner Ltd ET/1315342/12

For further information or to discuss the issues raised, please contact Turn on Javascript! or Turn on Javascript! on +44 20 3051 5711 at Abbiss Cadres LLP – www.abbisscadres.com. 

Disclaimer

Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information click here.

Circular 230 disclosure

To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Copying

If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.