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Holiday pay must include commission

Holiday pay must include commission

The European Court of Justice (ECJ), has determined broadly that in calculating holiday pay, an employer must take measures to ensure that a worker taking leave is paid by reference to commission payments that the worker would have earned if at work. Although the ECJ left the national Courts to determine the method of calculating holiday pay, it is likely that employers with employees earning commission will be required to calculate holiday pay by reference to the employee’s basic salary and commission.

This particular decision is another reminder that where a worker’s pay consists of a basic salary and other variable elements linked to work, the worker’s holiday pay should be reflect the normal amount theory are paid when not on holiday.

Employers may wish to look at their contractual leave arrangements and ensure that commission or other periodical payments are factored in to holiday pay calculations. Those employers which allow their workers more than the required 28 days leave may wish to cap pay for additional leave at basic salary.

If you would like more information about holiday pay or any other aspect of employment law, please contact us on 0114 255 0825.