EU Court ruling on holiday pay will have ‘serious implications’ for recruiters

Anna Scott

Employers must now take commission payments into account when calculating holiday pay, the European Court of Justice has ruled.

In Lock v British Gas, the court ruled that employees who earn sales commission should receive payment for commission as part of their holiday pay, even if they are not earning any commission when they are on leave.

The employee’s holiday pay should have taken into account his commission payments, despite him make no sales during his annual leave, otherwise “he may have been deterred from exercising his right to annual leave”, the court stated.

APSCo stated that it was “very concerned” by this ruling and has alerted its members. “This is obviously a huge issue for any commission-based sales environment and will consequently have a serious impact on recruitment firms which may now have to think seriously about how remuneration packages are structured – and potentially how they may need to be changed,” Samantha Hurley, head of external relations and compliance, said. 

“Rather unhelpfully the CJEU did not expand on its ruling to give any indication of how the holiday pay should be calculated and has said that this is for the UK courts to decide. And so, yet again are members are faced with uncertainty as to how to interpret the legislation, and we will need to await case law to give some clarity.”

Law firm Mishcon de Reya stated that it anticipates that employers will have to bear significant additional cost, the calculation of holiday pay will be complicated and risk unlawful deductions clams from their salespeople now being able to claim back-pay for past holidays.

“It is likely to be problematic working out, for example, the potential commission losses of employees who only make, say, one sale every month, or whose commission is seasonal,” it read.

“A further complication (though one that could potentially limit the employer’s liability) is that it is arguable the above will apply only to the four weeks’ minimum leave under the EU Working Time Directive, and not the longer leave applicable under the domestic Working Time Regulations (or under individual’s contracts).

“If an employee took time off recently, for example over Easter, they will still have three months from then in which to bring a claim for additional holiday pay, irrespective of whether the employer now starts paying the ‘correct’ amount.”