Advocate General Bot from the European Court of Justice has suggested that Article 7 of the EU Working Time Directive (No.2003/88) should be changed to reflect the fact that commission should be taken into account when calculating the correct remuneration for paid annual leave.
If the change is made then workers paid wholly or partly by commission are to be entitled to have this reflected in their pay for annual leave. However, commission will not have to be paid on holiday entitlements which exceed the minimum level of annual leave set out in the Working Time Directive.
Advocate General Bot considered that effective protection of the right to paid annual leave requires commission to be included when calculating holiday pay. ECJ case law has established that paid annual leave is a particularly important principle of EU law from which there can be no derogation, and that the purpose of paid annual leave is to enable a worker to enjoy a period of relaxation and leisure.
Article 7 gives workers the right to actually take the leave to which they are entitled. However, Article 7 makes no reference to how holiday pay is calculated.
The Advocate General concluded that commission should be included in the remuneration to which a worker is entitled during annual leave. The commission is directly linked to the work an individual would usually carry out. Though it fluctuates from month to month, the Advocate General considered that such commission is permanent enough for it to be regarded as forming part of that person’s normal monthly remuneration.
Failure to include the commission in holiday pay is capable of deterring an individual from exercising their right to paid annual leave. Advocate General Bot rejected the argument that the rate of commission already takes into account the fact that workers will be unable to generate commission during annual leave.
Advocate General Bot concluded that it is for the referring tribunal to determine what methods and rules are appropriate for calculating holiday pay which includes a component to reflect commission. However, he considered that the average amount of commission received over a representative period, such as 12 months, might be appropriate.
The law in relation to paid annual leave is constantly evolving and at Palmers, we can offer guidance to employers about the latest developments in this complex area.
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