The European Court of Justice has recently ruled that where staff are paid commission on sales, their holiday pay should include not only basic salary but also an allowance for the commission that they would normally have earned in the same period had they been at work.
This decision may be in the news in the coming days and weeks so staff may ask about it. It is important, but perhaps not be quite as important as it looks at first.
The court’s point was that staff should not be discouraged from taking holidays by losing commission for that period. This will therefore matter where there is a clear link between sales and commission for that month, so taking holiday generally means noticeably lower commission in that month’s pay.
It may turn out not to apply when sales are of a kind that tend to take months to come through and are not therefore much affected by a sales reps taking a week or two’s holiday.
It will most likely not affect other kinds of bonuses that staff can earn whether or not they are on holiday e.g. if based on a company’s or department’s quarterly or annual results.
We do not yet know exactly how UK courts and tribunals will apply this, so if you are an employer and any staff do ask about this I suggest for now that you tell them you are still looking into it but will of course pay them anything to which they are legally entitled. If you think this is likely to affect you and you would like more specific information as soon as the position is clearer, please get in touch.
For the future, when deciding on salary and commission packages, it looks as though many employers will need to allow for the fact that employees’ holiday pay will include not just basic salary but the average equivalent of commission they could have expected to earn had they been at work rather than on holiday.
Please note that the information in this article is not designed to provide legal or other advice or create a solicitor – client relationship. No liability is accepted for any loss caused in reliance upon its content and you should not take or refrain from taking action based upon the same.