Case Law Update: Holiday Pay Calculation

Case Law Update: Holiday Pay Calculation

It is well-established law that workers on holiday must be paid at a rate of a week’s pay for each week of their statutory holiday entitlement. A very recent case before the European Court of Justice (ECJ) Lock -v- British Gas Trading Limited considered whether a worker’s pay should include commission. The worker in question was a sales person whose pay consisted of both basic pay and commission. His pay varied from month to month and on average he made up 60% of his total pay on commission. The employee was paid in arrears and suffered financial loss in the months following a period of holiday due to his inability to earn commission while on holiday.

The ECJ ruled that pay must include commission for workers who ordinarily receive same. The ECJ said that the purpose of holiday pay is to put the worker in the position they would have been, had they been at work and this should include pay which is “linked intrinsically to the performance of the tasks which the worker is required to carry out under his contract of employment”.

On the point of how commission is to be calculated the ECJ stated that the method of calculation should be determined by national law.

We are awaiting another important decision later this year on whether overtime should also be factored into holiday pay. We will update Members when this decision is issued.

At the EEF Annual Review Conference being held on 11 June 2014 we will be looking at the practical implications for employers of this recent ECJ judgment and also how Members can best manage holidays and sickness absence in light of current case law.

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