Recently, the Supreme Court decided on the reference period to be applied when calculating compensation for loss of commission during holiday to an employee paid on a commission basis.

An employee paid on a commission basis may be entitled to compensation for loss of commission during holiday.

In the Supreme Court proceedings, the parties agreed that the employee was entitled to compensation for loss of commission during holiday. However, the parties disagreed on how to calculate compensation. The employer had paid holiday allowance (12.5 %) of the commission in the preceding qualifying year. The employee was of the opinion that compensation was to be calculated based on the average fee in the preceding three months, and that a correction was to be made as regards absence.

It appears from the legislative history behind the Holiday Act that an employee, when taking holiday, is entitled to combine the fixed salary with holiday allowance of the commission in the preceding qualifying year.

The employee claimed that the wording in the legislative history did not rule out application of a different calculation method. Compensation had to amount to what the employee would have earned if the employee had not taken holiday. Similar principles are found in section 9 (3) of the Salaried Employees Act in relation to salary during sickness to employees paid on a commission basis where commission is calculated based on a specific reference period.

The employer referred to the wording in the legislative history and claimed that there was no authority to calculate compensation based on another method.

With reference to the Holiday Act and the legislative history behind the act, the Supreme Court upheld the High Court’s judgment. The employee was not entitled to any other compensation than the right to holiday allowance of 12.5 % of the commission in the preceding qualifying year. The Supreme Court further found that there was no authority to calculate compensation based on a different method, and section 9 (3) of the Salaried Employees Act did not change this fact.

WHEN ARE YOU ENTITLED TO COMPENSATION?

Previous case law has determined when an employee is entitled to compensation for loss of commission during holiday. The commission must constitute a “considerable part of the salary” and must be lost due to taking of holiday”. Read more in our newsletter: Compensation for loss of commission during holiday

NEW HOLIDAY ACT

The taking of concurrent holiday under the new Holiday Act will come into force on 1 September 2020. In the legislative history behind the new Holiday Act, it is stated that changes are not intended in relation to the current practice concerning commission. The assessment as to when an employee is entitled to compensation for loss of commission during holiday will therefore be the same.

It also appears from the legislative history behind the new Holiday Act that if an employee is entitled to compensation, the employee will, during holiday, be entitled to combine the fixed salary with the holiday allowance (12.5 %) of the commission in the holiday year. Consequently, the calculation is not to be based on the preceding qualifying year under the new Holiday Act, but instead on the commission earned during the holiday year.

contacts

Rasmus Asger Sparholt

Assistant Attorney