Member Article

The Annual Leave Act is mandatory. This means that contractual terms, in a contract of employment, which contravene the Annual Leave Act are invalid. Likewise, contractual terms which are in contravention of a collective bargaining agreement are invalid.

A corner stone of the Annual Leave Act is the main principle that all remuneration from the employer is to provide a basis for holiday pay, i.e. fixed salary and commission. This does not, however, apply to all commission because such commission, which is paid as a group bonus or the like and which is not based on the efforts of the individual, does not normally provide a basis for holiday pay. It is relatively common that company’s have addressed the problem by attempting to draft contracts along the lines of, "The employee has 10% in commission on all his/her sales inclusive of holiday pay," or "No holiday pay is payable on commission." Such wording is not, however, legally enforceable which means that the employee can claim, over a three year period before the claim is time-barred, 12-14% in remuneration in addition to commission received.

Where a company is bound by a collective bargaining agreement – primarily for professional employees – the company must also pay a pension under a supplementary pension (ITP) plan. This obligation thus follows from the collective bargaining agreement and deviation from this agreement can only take place pursuant to collective bargaining at a central level. According to the ITP plan, as a principle, all remuneration from the employer is to provide a basis for pension payments, which includes commission payments, regardless of what the parties may have agreed upon

Yes, there are a couple of alternative solutions which limit or eliminate the risk of future claims. The solution will depend upon whether the company has a collective bargaining agreement or not, and naturally how the current commission terms are worded.