Calculation of holiday pay based on commission and overtime may have to change
There could soon be a need for employers to look very carefully at how they calculate holiday pay in the light of a landmark decision from the European Court. The case before them concerned a Mr. Lock, a gas sales consultant and had been referred to Europe by the UK’s Employment Appeal Tribunal (EAT). Mr. Lock’s pay was made up of basic salary plus commission calculated on the basis of completed sales. The commission was generally paid some weeks after the conclusion of the sale, but usually represented over 60% of his normal monthly earnings. During holiday periods he was paid in the same way as when he was at work: his basic salary plus any commission due from sales completed previously. He took three weeks' annual leave over Christmas/New Year; during this time he received past commission but did not earn any commission as he was not making any sales and, as a result, his salary in the months following was reduced. He then decided to ask for a "top-up "