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Holiday pay update and predictions

23 May 2014

Holiday pay and commission

As expected, Mr Lock has won his claim against British Gas Trading for his holiday pay to be calculated to include commission.  The European Court ruled that Mr Lock’s contractual commission was part of his normal pay and intrinsically linked to the job he did.  In fact, commission typically amounted to around 60% of his total pay.

This ruling will apply to any employee who participates in a commission or bonus scheme that pays out on a regular basis.  It will not apply to employees who earn a discretionary bonus at the end of a year.

An unresolved issue is the “look back” period: when an employee goes on holiday, what period do you use to calculate the amount of commission to pay them?  UK legislation suggests the 12 week period before the holiday (for an employee with normal working hours); some statements in the European Court suggest a 12 month period would also be appropriate.  The UK Employment Tribunal will make a decision on this when the case returns there.

Holiday pay and overtime/allowances

Still in the pipeline are the cases of Neal v Freightliner and Fulton v Bear Scotland.  The first is about holiday pay and overtime, the second about holiday pay and allowances.  They will be heard by the EAT on 30 and 31 July 2014 and a decision can be expected a few weeks after that.

Our predictions

Firstly, we predict that the EAT will not need to make another reference to the European Court on the issues of overtime and holiday pay (although it could do so if it wanted).

Secondly, as we have suggested at our seminars and workshops over the last few months, the decision looks likely to go against employers and to find that both overtime and regular allowances must be reflected in holiday pay.  There is perhaps some distinction to be drawn between genuinely voluntary overtime, that is only worked occasionally, and “contractual” overtime (i.e. additional hours that are always worked without question), but we will have to see if the EAT makes any finding on that question.

Thirdly, the potential for retrospective claims in this area is enormous and has yet to be explored in the cases that have come before the tribunals so far.  It seems only a matter of time until a high value retrospective claim is brought.

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