Calculation of holiday pay to include commission following ETs decision in Lock v British Gas
Lock was a sales consultant whose salary included a basic element and commission. Around 60% of his income was made up of commission, paid in arrears and calculated on the number of sales achieved by Lock. Naturally, during periods of annual leave Mr Lock could not generate sales. This meant he could not earn commission. Consequently, following any period of annual leave, his income was significantly lower.
In 2014 Lock brought a claim to the employment tribunal. The employment tribunal in turn referred the case to the European Court of Justice (ECJ) for a preliminary view on whether commission should be included as part of a holiday pay calculation and, if so, how the commission should be calculated. The ECJ agreed with Mr Lock, finding that commission should be paid during holiday periods. The matter was remitted to the employment tribunal and the case re heard on 4th and 5th February 2015. The employment tribunal decision was published yesterday.
Following the ECJ’s ruling, the employment tribunal finds that commission should be paid during holiday periods. The Working Time Regulations 1998 are amended to bring them in line with the European legislation, by inserting the following additional words to regulation 16(3):
(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 means that holiday pay calculations for workers who are paid commission as a part of their remuneration must include commission.
This decision has far reaching effects on any industry, including recruitment and umbrella companies, where workers receive commission as a significant part of their income. Future holiday pay calculations may need to be revisited and commission schemes reconsidered. Back pay claims will be limited to 2 years, from 1st July 2015.