NEWS ALERT – commission needs to be included within holiday pay

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Posted in:HR and Employment|March 26, 2015 | Join the mailing list

The Employment Tribunal in Leicester has reached its long awaited decision in the case of Lock v British Gas and Secretary of State for Business, Innovation and Skills.

On 10 April 2012, Mr Lock brought a claim for unlawful deductions from wages, arguing that his holiday pay should have included an amount to reflect the sales commission which he regularly earned when he was not on holiday, whereas the holiday pay which he
had received had only been his basic salary. The argument was that the dip in income for the holiday period potentially discouraged Mr Lock from taking time off as holiday and that this was not in the best interests of his health and therefore was contrary
to the EU directive governing this area.

Mr Lock’s case was initially referred by the Employment Tribunal to the Court of Justice of the European Union (“CJEU”) for it to decide whether European Law required commission to be taken into account when calculating holiday pay. The CJEU decided that holiday
pay did need to reflect commission as well as basic salary and then sent the case back to the UK Tribunal for it to decide the case in light of the CJEU’s ruling.

The relevant UK legislation is the Working Time Regulations 1998 and the wording of the regulations is at odds with the CJEU’s ruling on commission and holiday pay. However, the Employment Tribunal has now decided that the applicable regulation (regulation
16(3)) must be applied as if it included some additional wording as stated in the Tribunal’s judgment, so that it has the effect that commission has to be taken into account when calculating the amount of holiday pay payable to a worker taking leave.

The Tribunal’s reasoning was that it could see no difference between commission and pay for non-guaranteed overtime, which it has already been decided must be reflected in holiday pay in the cases of Bear Scotland v Fulton, Hertel v Woods and Amec v Lawcase.

For more information about any of the above or for practical commercial advice on this or any other aspect of employment law, please contact
Kim Freeman-Smith of the Berg Employment Team on 0161 833 9211 or email her at
kimf@berg.co.uk.

Follow us on Twitter: @Berg_HR

(The information and opinions contained in this news alert are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice
should be obtained before taking, or refraining from taking, any action as a result of this news alert.)

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