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Court rules that commission must be included in holiday pay

29 May 2014

The European Court of Justice (ECJ) has ruled that commission payments must be included in holiday pay.

In the Lock v British Gas case, the ECJ found that where commission forms all or part of an employee’s pay, this must be taken into account when calculating their holiday pay.

The ruling could have a particular impact where commission makes up a significant proportion of an employee’s salary.

Under existing regulations, all UK workers have the right to paid annual leave, on the basis of a week’s pay for a week’s leave. The ECJ ruled that as commission is intrinsically linked to an employee’s performance of the tasks carried out under their employment contract, it must also be taken into account in leave calculations.

Some experts have warned that the ruling will lead to additional complexities and increased expense for employers.