Should results-based commission be included in holiday pay? On 22 February 2016 the Employment Appeal Tribunal (EAT) found in Lock v British Gas that UK law should be interpreted so that it conforms to EU law on holiday pay.
On top of his basic pay, Mr Lock received commission on successful sales as a salesman with British Gas, however, he received his basic pay only for holidays.
In 2012, when the case was initially taken to the Employment Tribunal (ET), the ET made a reference to the Court of Justice of the European Union (CJEU) for a ruling as to whether UK law should include commission in its rules for calculating holiday pay and the basis for the calculation by employers.
The CJEU ruled results-based commission should be included in holiday pay for the 4 week holiday entitlement under the EU’s Working Time Directive and that it is possible to read words into domestic legislation.
Although British Gas appealed the ruling, the EAT dismissed the appeal stating that it is necessary to imply words into the Working Time Directive in order for it to be compliant with EU law. The EAT’s decision to dismiss the appeal is unsurprising following another recent decision in Bear Scotland v Fulton, which found words should be implied into UK law to ensure that overtime is reflected in holiday pay.
The method by which companies should calculate holiday pay where an employee is entitled to results-based commission is to be decided as the case continues in the ET.
Unless it is a case that the results-based commission structure already compensates for holidays, it is recommended that companies include commission in holiday pay.
If you have any questions about holiday pay or other employment law matters, please contact Tom Evans on 0151 230 1217 or email tom.evans@dtmlegal.com.
