Holiday pay and Commission: The Latest

The Employment Appeal Tribunal (EAT) has now delivered its decision in the case of British Gas Trading Limited v Lock and Others (UKEAT/0189/15). This judgment is the latest in a long line of decisions relating to the question of how holiday pay should be calculated and what should and should not be included in such.
In this particular case, Mr Lock was employed under a contract that provided him with a basic salary and a performance related commission package. When on annual leave, Mr Lock received only his basic salary although he did also receive payments in respect of commission already earned and due to him. Mr Lock challenged his employer’s approach on the basis that when he was on holiday he could not generate any new commission and therefore could not earn as much. Mr Lock argued that his holiday pay should therefore have included commission.
Mr Lock’s employer resisted his challenge arguing that the Working Time Regulations 1998 did not make provision for a ‘weeks pay’ (on which holiday pay is calculated) to include commission payments where such commission is based on performance.
The Employment Tribunal which considered the case at first instance identified a conflict insofar as the European Court of Justice (ECJ) in a recent case had determined that workers should receive ‘normal remuneration’ whilst taking holiday and that any payments linked intrinsically to tasks that the worker is contractually obliged to perform fall within the definition of ‘normal remuneration’.
The Employment Tribunal referred the matter to the ECJ for consideration which stated that commission must be taken into account in calculation of holiday pay. No definitive guidance was provided for the method of calculation. The Employment Tribunal ultimately found in favour of Mr Lock.
Mr Lock’s employer appealed to the EAT suggesting that the interpretive approach taken by the Tribunal has been inappropriate. The EAT however has now confirmed that it has rejected the employer’s appeal and that commission should indeed be payable in holiday pay.
 
Although no appeal has been lodged it has been suggested that the employer is seeking leave to raise a further appeal and so the situation may change in the future.