Holiday pay and commission – Unison reports on Twitter that the Lock Employment Tribunal decision is out

Through the power of social media, it appears that the much awaited Employment Tribunal (“ET”) decision in Lock v British Gas Trading Ltd (2014) is out.

It has been clear for some time that commission paid for success (i.e. securing a contract or sale) should be included in a worker’s holiday pay provided it forms part of a worker’s normal remuneration. This was the decision reached by the European Court of Justice last May (see here). What is unclear, and the question before the ET, was whether our UK rules for calculating holiday pay in the Working Time Regulations 1998 (“WTR”) could be interpreted to reflect this European decision and, if so, whether Mr Lock’s commission payments did form part of his normal remuneration, a process which should hopefully provide some guidance for all employers on when commission payments should be reflected within holiday pay.

A copy of the decision has not yet been made widely available but the indications from @Unison_Legal are that the decision is not a shock – the ET has held that the WTR can be read to bring its provisions in line with the requirements of the Working Time Directive (“WTD”).

Whilst the extract of the decision we have seen does not take us any further on when commission payments will be deemed to be “normal remuneration”, the ET has indicated that where they do, holiday pay should be calculated using the formula provided for when a worker’s pay during normal working hours varies by the “amount” of work done. This incorporates a 12 week reference period – which whilst providing certainty, may leave the door open for workers to manipulate their working pattern to take holiday during those weeks where their holiday pay will be at its highest.

However, before employers rush to change commission structures in light of this decision, we must wait for the ET decision to be made available so that it can be properly analysed.  On the information we have, we still do not know when commission will be deemed to be part of a worker’s normal remuneration. And it should also be remembered that another ET may well decide that a different formula for calculating the commission element of holiday applies (as seen in the “overtime pay” decisions where different words were added into the WTR by different ETs to achieve an interpretation consistent with the WTD – the latest decision being that of the EAT in Bear Scotland last November (see here)) or that the case is appealed with a different result.

We shall provide a further update once more information is available. In the meantime, please do not hesitate to speak to your usual OC Contact if you have any queries.