Holiday pay ruling has potential pensions consequences

03 June 2014

A recent ruling on holiday pay calculations could have consequences for pension schemes, claimed law firm CMS Cameron McKenna.

The Court of Justice of the European Union (CJEU) found in Lock v British Gas Trading that commission and other variable earnings should be incorporated in annual leave payments. However, this could affect workplace retirement savings.

Keith Webster, Partner at CMS, explained that if pensionable wages are defined by reference to elements of flexible reward, or provide that all pay is included, incorrect figures may have been used to calculate contributions and benefits.

“Employers that pay these types of variable remuneration will need to consider whether they are affected by the decision and check what the implications may be for their pension schemes,” he said.

In principle, Webster argued that staff could bring deduction from wages claims going back to 1998, when the Working Time Regulations were introduced. However, the CJEU stated that the precise method of calculation is to be determined by national law, and no decision by a UK employment tribunal has yet been taken.