Commission and Holiday Pay

There was an interesting case of Lough v British Gas Trading Limited heard by the European Court of Justice which may affect any employer or employee where a significant portion of the employees salary is based on commission. The preliminary non-binding opinion of the Advocate essentially found that any pay 'intrinsically linked' to performance of the workers job (which in this instance related to commission) should be considered as basic pay for the purposes of determining an employees holiday pay entitlement.

This was an opinion of the advocate and in most instances would be followed by the ECJ. That being said the ECJ does not have to follow the opinion but ordinarily does.

It remains to be seen whether or not the decision will be limited in its application. However, it does give a strong indication of the Courts interpretation of basic pay. It would seem that in interpreting basic pay the European Court is likely to include other regular payments, fixed or unfixed, which relate to the performance of the work (e.g. Shift allowances). If this more expansive interpretation is applied to basic pay in the context of holidays it is possible to see such interpretations of basic pay being applied in other areas. The one caveat that must attach to this note is whether or not the ECJ will accept the opinion of the Advocate and we will not know that until the Court issues its decision. For the moment it would seem that employers should assume that holiday pay is the fixed salary plus an annual average commission payment and any other regularly earned payment that is linked to the performance of the workers job.