Holiday pay – it should include an element for commission

16 April 2015

The Employment Tribunal have now confirmed the words to be read into the Working Time Directive to reflect the ECJ’s decision that commission should be included in calculations of holiday pay, in the case of Lock v British Gas Trading Ltd.

A number of recent cases have confirmed that holiday pay should reflect a worker’s “normal pay”. We have already reported on the decision of Bear Scotland Ltd v Fulton
where holiday pay should include payments of overtime that a worker is not allowed to refuse. The Lock decision now also confirms that a similar approach should be taken in respect of commission payments.

Almost a year ago, the European Court of Justice held that workers must receive their “normal remuneration” during annual leave, including commission payments. As we have reported previously, “normal remuneration” is partly a question of the regularity with which certain types of payment are normally made and the extent to which parts of individuals’ normal pay are “intrinsically linked” to the work they are required to carry out under their contract of employment.

In Lock, the ECJ held that Mr Lock’s earnings were partly comprised of commission, and he did not have the opportunity to generate commission while on annual leave and was
therefore at a financial disadvantage when that shortage of commission became apparent, some weeks later. It found that Mr Lock’s commission payments were directly linked to the performance of the tasks he was required to carry out under his contract and therefore
commission must be taken into account in the calculation of his statutory holiday pay.

Following this decision, the ECJ remitted the case back to the Employment Tribunal to consider how UK law should be interpreted to put in place this ruling.

The Tribunal’s decision

The Tribunal has now considered this matter and has decided that words can be read into the Working Time Directive 1998 to reflect that commission should be included in the calculation of holiday pay. The calculation should take into account an average hourly rate of remuneration (including commission and similar payments) on the basis of the 12 weeks
immediately preceding the calculation date.

This is not a ground-breaking decision, as it merely confirms how the ECJ’s finding will be implemented, but it is a useful reminder that holiday pay extends to more than just “basic” pay.

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