Holidays and remuneration: a recent judgment of the European Court of Justice

With decision May, 22nd 2014 (Case C- 539-12), the Court of Justice of the European Union has ruled that, in the event that an employee remuneration is composed by a fixed salary on top of a variable salary, the variable salary must be included in the calculation of the total remuneration of the employee during holidays.

Only the fixed remuneration may be a disincentive for workers to exercise their right to yearly holiday, as there would be a sharp reduction in the remuneration during holidays.

Therefore, if there is a strong link between variable salary and the performance of duties of the employee, the amount of the variable salary must be considered in the calculation of the total remuneration payable during holidays.

In respect to Italian employment law, there are no specific rules on the calculation of the amount of the remuneration during holiday periods. A single element of pay may be included only if provided by the national collective agreement.

If the judges should not apply collective agreements as in violation of EU rules, companies could be forced to revise the remunerations and could be exposed to litigations by employees.