What’s the deal with holiday pay?


In the summer we saw the European Court of Justice (ECJ) ruling that commission must be incorporated after a claim by Mr Lock, a British Gas employee. Then, more recently, the Employment Appeal Tribunal (EAT) decision in the case Bear Scotland v Fulton & others that holiday pay should include non-guaranteed overtime.

But where does this leave businesses when calculating holiday pay?

Under current EU regulations, workers have the right to 5.6 weeks of paid leave at the statutory rate of ‘a week’s pay’ for each week of leave. This has traditionally excluded payments such as working allowances, expenses, overtime, commission and bonus payments.

In Lock’s case, around 60% of his salary was commission and paid in arrears. After a two week break in 2012, lock received less pay in the month following and made an employment tribunal claim for lost holiday pay.

The case was referred to the E.C.J. It found that Lock would be financially disadvantaged after taking holiday and this could deter him and others from exercising their right to paid holiday. Therefore, the intention of the EU directive had not been property implemented.

The ECJ did not clarify how holiday pay should be calculated and the case has been referred back to the UK tribunals to determine the calculation and compensation for Lock next year.

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