Statutory holiday pay should include variable pay and allowances

The European Court of Justice has recently decided in the case of Lock v British Gas Trading Ltd (Case C-539/12) that an employee should receive “normal pay” during their 5 weeks of UK statutory annual leave. “Normal pay” is not limited to base pay, but includes compensation for commission and allowances which the employee would have received had they been working during the leave.

Click here to read the full version of our recent European Employment Law Alert on this case:

What does this mean for employers?

The ECJ decision has major implications for clients with UK operations who operate variable pay programs, or pay overtime or attendance allowances. Going forward, these additional amounts may need to be included in annual leave payments and employees could also bring “back-pay” claims for extra holiday pay. UK employers may need to consider these extra annual leave costs when agreeing to extra pay elements such as variable pay, paid overtime or allowances.