A UK Employment Tribunal has ruled that commission must now be taken into account when calculating employee holiday pay.
The Employment Tribunal in the case of Lock v British Gas ruled that any employee who receives commission should receive varied holiday pay to reflect their normal income.
Mr Lock was a salesman for British Gas on a basic salary with variable commission paid in arrears. His commission depended upon sales achieved and could not be earned whilst he was on leave, which meant that he would lose income by taking holiday.
The Employment Tribunal has added new wording to the Working time Regulations 1998 which states:
2. Regulation 16(3) of The Working Time Regulations 1998 is to be interpreted and applied as if it had the following paragraph added to it:
(e) as if, in the case of the entitlement under regulation 13, a worker with normal working hours whose remuneration includes commission or similar payment shall be deemed to have remuneration which varies with the amount of work done for the purpose of section 221.
This amendment follows the Employment Tribunal’s referral of the case to the European Court of Justice (ECJ). The ECJ concluded that Mr Lock’s commission was clearly linked to the work that he carried out and must be taken into account when calculating his holiday pay. This is because even though the amount of commission he earned was not fixed, it was permanent enough to be regarded as a normal part of his salary.
It is now up to the Employment Tribunal to decide how this ruling will be applied in the UK.
The incoming Deduction from Wages (Limitation) Regulations 2014, which come into effect from 1st July 2015 will affect whatever the tribunal decides. These state that any claims for unlawful holiday pay deduction will be time-limited to the two years immediately prior to the date of the claim.
We will keep you informed of any updates to this case.