Commission and holiday pay
Thursday 26th March 2015
In Lock and ors v British Gas Trading Ltd and anor, the ET has now held that the Working Time Regulations 1998 can be read in a way which is compatible with EU law so as to include commission payments in the calculation of holiday pay.
Mr Lock was an energy trader, paid by way of basic salary and commission in arrears on his sales. His commission usually exceeded his basic pay. When Mr Look took holiday, he was paid his salary plus any commission which fell due for payment while he was on leave. As he could not complete any sales during his leave, his pay was lower on his return. He argued this could deter him from taking holiday. The case reached the ECJ, which held that commission payments must be taken into account when calculating holiday pay.
The ET then needed to determine if the WTR could be read to give effect to EU law. In deciding that this was possible, the ET read the WTR as if they contained a new regulation which included “commission or similar payment” in the calculation of holiday pay. However, this only applies in respect of the 4 weeks of European leave, not the additional 1.6 weeks of UK leave.
Further hearings are likely to determine whether British Gas had already adequately compensated Mr Lock under the re-written WTR. This means there is currently little in the way of practical guidance for employers as to how to accurately calculate holiday pay in this type of case.
All information in this update is intended for general guidance only and is not intended to be comprehensive, or to provide legal advice.