It Pays to Take a Holiday

It is common in some jobs for a large proportion of an employee’s salary to be made up of commission payments from, for example, successful deals. During annual leave, however, those employees will not have had the opportunity to secure deals which could generate commission payments at a later date, leading to an adverse financial impact. This was the scenario in the long-running case of Lock v British Gas Trading Limited.

Mr Lock presented his case to the Employment Tribunal as long ago as April 2012. The main issue related to the Working Time Regulations 1998 (WTR) which governs how holiday pay is calculated. On the face of it, the WTR didn’t appear to require commission payments to be taken into account when calculating holiday pay for employees with normal working hours. Mr Lock argued that commission payments should be taken into account since these formed part of his normal remuneration. The matter was referred to the Court of Justice of the European Union (CJEU) last year, who agreed with Mr Lock, adding that not including commissions in the calculation of holiday pay may deter employees from taking annual leave, especially if commissions made up a large part of their pay.

The case was referred back to the original Tribunal to decide:

  1. Whether the WTR could be interpreted to include commission payments in holiday pay following the Judgment of the CJEU; and
  2. How should holiday pay in these circumstances be calculated?

In relation to the first issue, the Tribunal has decided that the WTR could be interpreted in that way, which is perhaps not surprising given the CJEU decision. The current position, therefore, is when calculating holiday pay for an employee who receives commission payments, those commission payments must be taken into account.

However, the second and arguably more important question, will not be decided until a later date yet to be set. A full report will follow once that further decision has been handed down.

Director of Legal Services

James Tamm

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We combine the service quality of a law firm with the certainty of fixed-fee services to provide expert, solutions-focused Employment LawHR and Health & Safety support tailored to employers.

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