Holiday pay and commission – edging towards a complete answer

13 Apr 2015

The latest Employment Tribunal decision in the Lock v British Gas case about holiday pay and commission is as notable for what it has not decided as for what it did decide.

The Tribunal was charged with working out how to fit the ECJ's decision in Lock v British Gas Trading, that holiday pay be calculated to include commission, into the Working Time Regulations 1998 (WTR). The WTR say that, where a worker has normal working hours, their holiday pay is to be calculated by reference to the pay they receive for those hours, ignoring any variable elements such as commission. Clearly this wouldn’t work for Mr Lock.

So the Tribunal gave effect to the ECJ decision by deciding that it could write a new provision into the WTR to the effect that a worker whose remuneration includes commission (or “similar payments”) should be treated as if their pay varies with the amount of work done.

If this sounds tortuous, it is. But the effect is to compel employers to take commission into account.

What the Tribunal did not decide

Two issues were held over to a further hearing: what is the appropriate reference period, and how to actually quantify what the commission element of holiday pay should be.

In the case of the reference period it seems logical that it should be the 12 weeks prior to the holiday, but we shall see.

Also left open was the question as to whether the use of the words "similar payments" in the Tribunal's amendment to the WTR may give even wider scope to the range of payments to be included when calculating holiday pay.

We will keep you informed about future developments on these issues.

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