Commission and Holiday Pay: No Change from Court of Appeal


3 mins

Posted on 10 Oct 2016

Workers who earn results-based commission are able to enforce their right to have commission included in their holiday pay by bringing an employment tribunal claim. 

Speedread

Workers have the right to have an amount included in their holiday pay to reflect commission they have been unable to earn due to being on holiday. The Court of Appeal has ruled that UK legislation can be interpreted so as to give effect to this right. Workers can therefore enforce this right by bringing an employment tribunal claim.

The Lock v British Gas case will now return to the Employment Tribunal who will decide how Mr Lock’s holiday pay should be calculated. Employers will be particularly interested to see what reference period the employment tribunal uses for the calculation. 

Facts

In Lock v British Gas, Mr Lock received a basic salary plus commission on sales he achieved. Commission made up approximately 60% of his remuneration and was paid several weeks or months after the sale was concluded. When he went on holiday he was paid his basic salary, together with any commission that fell due for payment during that period. However, his income dropped following his return from holiday as he had not made any sales whilst on holiday. He brought a tribunal claim, seeking an additional amount in his holiday pay to reflect the commission he had been unable to earn whilst on holiday. 

In May 2014, the ECJ ruled that commission payments must be taken into account when calculating holiday pay. This is because the Working Time Directive requires that workers receive their normal remuneration whilst on holiday.

On the face of it, the UK legislation (the Working Time Regulations 1998 (“WTR”)) does not provide for commission to be included in holiday pay calculations in cases where employees have normal working hours and their remuneration does not vary with the amount of work they do. However, the employment tribunal (whose decision was upheld by the Employment Appeal Tribunal) read additional wording into the WTR so that the legislation could be interpreted to include the right to commission in such cases. British Gas appealed to the Court of Appeal. 

The decision

The Court of Appeal upheld the decision of the employment tribunal. The tribunal had been correct to interpret the WTR so as to include commission payments in statutory holiday pay calculations. 

Implications

Workers are able to enforce in the employment tribunal their right to have an amount included in their holiday pay to reflect commission they have been unable to earn due to being on holiday. 

This case will now return to the Employment Tribunal to answer the question of how Mr Lock’s holiday pay should be calculated. Employers will be particularly interested to see what reference period the Employment Tribunal uses for the calculation. The Working Time Regulations 1998 use the 12 week period before the holiday is taken. However, there remains some doubt over whether a 12 week period is sufficiently representative to comply with EU law, or whether a longer period needs to be used.

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