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Sector Insights

Is this Holiday Season Going to Cost Employers Even More?

27.06.2014 Issues at Work, Employer's Issues

Rebecca Lynch

Rebecca Lynch Partner, Group Referrals Director

As we draw nearer to the holiday season many of you as employers will associate this with a time of low productivity and low revenue due to employee absences.

Adding to your woes about the cost of the holiday season is the recent landmark decision of the European Court of Justice (ECJ) in the case of Lock v British Gas Trading Limited, a case which was referred to the ECJ by the Leicester Employment Tribunal.

In this case the ECJ held that Mr Lock’s holiday pay should include a payment in respect of the commission that he earned when he was normally at work. The reasoning behind this decision being that if a worker’s remuneration includes contractual commission, determined with reference to sales achieved, then if commission payments are not taken into account the worker will be placed at a financial disadvantage, in the form of less remuneration following a holiday. There is therefore a concern that the worker would be discouraged from taking annual leave, which was not the intention of the legislation.

For any employer that regularly pays commission to its employees, but bases holiday pay on basic pay only (as many do), this decision is potentially extremely costly.

You may well already be considering the repercussions of this case and the cost of the holiday season ahead.

Our advice for the time being is to sit tight as we do not yet have a UK ruling on the impact of this decision and, if the Judgment is adopted, how holiday pay should or could be calculated in these circumstances.

We will keep you posted of any further developments but having spoken to the Employment Tribunal this week we are informed that as yet the case has not been listed for a hearing.

Watch this space…

Article authors:

Rebecca Lynch