23 May 2014: As widely reported in the media this week, the European Court of Justice has held in Lock v British Gas Trading Ltd that, when a worker’s pay ordinarily includes commission, her salary should not be reduced because she has been unable to earn commission while on annual leave.
Mr Lock was a sales consultant for BGT who was paid basic salary plus commission on a monthly basis. The commission fluctuated but was roughly 60% of his pay overall. When he took holiday, he lost commission and earned less in the following months.
The ECJ stated that workers must receive their normal remuneration for periods of annual leave. Mr Lock might be deterred from exercising his right to paid holiday if he lost out financially as a result of taking holiday, especially if commission accounted for 60% of his pay.
The ECJ unhelpfully held that it is for the national courts to assess the method of calculating commission which a worker would be entitled to in this case. Employers will probably need to average out commission to calculate what the worker would have earned had she not been on holiday. The case is likely to trigger back-dated claims from people who earn variable rates of pay and who take a dip in earnings because of holidays and may alarm anyone employing sales people in particular.
Reculver Solicitors is a firm of specialist employment solicitors based in Holborn, Central London.