Changes to Holiday Pay Entitlement: What Employers and Employees Need to Know

The Court of Justice of the European Union (CJEU) has held in a landmark case that employees are entitled to have overtime, shifts and commission included in holiday pay.  As a consequence, thousands of UK workers could be entitled to claim millions from their employers in backdated payments.

Lock v British Gas Trading Limited [2014] CJEU C 539/12, centred on a British Gas salesman whose monthly wages were regularly made up of 60 per cent commission.  With such a high proportion of their wages obtained through commission, many employees like Mr Lock, simply could not afford to take time off work.

The CJEU held that employees in this situation should no longer be deterred from taking holidays due to a decrease in pay.  In making the decision, the considered whether Mr Lock’s commission was “intrinsically linked” to the completion of the tasks required of him under his contact of employment.  In finding in Mr Lock's favour, the Court ruled that his performance was indeed intrinsically linked, therefore he was entitled to holiday pay which properly reflected his normal pay - commission included.

Claims will be made under the Working Time Regulations, so it is believed that claims could be backdated as far as 1998.  However, the CJEU has left it up to individual member states to decide how to calculate holiday pay entitlement based on their new ruling, thus until the employment tribunal considers this question and can provide specific guidance, it is impossible to know exactly how costly the change will be for employers.

It might not be all bad new for employers though - with a happier and most rested workforce, productivity may to increase.

In addition to the Lock ruling on holiday pay, the CJEU were also asked this month to consider in a separate case whether employers must pay for outstanding accrued holidays on the death of an employee.

This case was brought by a German widow, seeking to receive payment in lieu of her late husband’s unpaid holidays.  Her husband had been off sick long-term and had accrued 141 days’ holidays, making the amount in question a substantial potential payment to the widow.  The CJEU held that the employer was obliged to make the payment to the worker’s estate, as the death of a worker does not bring their contractual and statutory rights to an end.

Holiday Pay Solicitors in Glasgow?

If you are an employee looking to discuss your holiday pay entitlement, or an employer looking for advice on how to calculate your employee's' holiday entitlement, Employment Law Glasgow's specialist lawyers can help. To get in touch, please complete our online enquiry form. You can also call 0141 811 0224.