Holiday Pay and Commission: Latest Ruling

    View Authors February 2016
    The Employment Appeal Tribunal has today given its decision in Lock v British Gas, unsurprisingly upholding the principle that holiday pay should include an allowance for “normal” commission payments. But anybody hoping for useful practical guidance on the nuts and bolts of exactly how commission should be taken into account for statutory holiday pay purposes will be disappointed. The EAT only dealt with the narrow issue of whether UK legislation can be interpreted in such a way as to give effect to EU law requirements regarding the calculation of holiday pay. As expected, the answer is yes. The bigger and more complicated practical issues have once again been left for another day.    

    In today’s decision the EAT said that there were no legitimate reasons for it to depart from its earlier decision in Bear Scotland, in which it also concluded that it is possible to interpret UK legislation on the calculation of holiday pay in a way which conforms with European law. It rejected arguments that Bear Scotland was distinguishable because it concerned non-guaranteed overtime, that the decision was manifestly wrong or that there were exceptional circumstances which justified its not being followed in the present case. It said that if Bear Scotland had been wrongly decided then this was a matter for the Court of Appeal to decide at a later date.

    So where does this leave employers?  It remains the case that as the law currently stands UK leave (i.e. the four weeks’ leave derived from the Working Time Directive) should include a sum in respect of commission where it forms part of a worker’s normal remuneration. Unfortunately we still do not have any guidance from the courts on practical issues such as how such calculations should actually be made, especially in cases where commission earnings may be less frequent or “lumpier” than those earned by Mr Lock.  Even the press release of Unison, supporting Mr Lock, is careful to limit the decision to the inclusion of “regular” or “normal” commissions. 

    In the meantime we wait to see if British Gas decides to take this further to the Court of Appeal. Our expectation is that it will.