Holiday pay: tribunal decides to include commission

The judgment in the important employment tribunal decision Lock v British Gas Trading Ltd, which deals with the inclusion of commission in holiday pay, has now been published.

On the return to the UK employment tribunal from the European Court of Justice, the employment tribunal has applied an extra subsection to the Working Time Regulations 1998 to make them comply with the Working Time Directive.

The subsection provides that the holiday pay of a worker whose pay normally includes commission should be varied to reflect the amount of work done.

Employers have been eagerly awaiting the judgment in the hope of some guidance on how the European ruling applies in the UK.

XpertHR has a full case report on Lock v British Gas Trading Ltd, including practical tips for employers and details of the likely next stages in this case.

Lock v British Gas – background

In the case of Lock v British Gas, Mr Lock, a sales consultant with British Gas, brought a claim to tribunal for outstanding holiday pay on the basis that it did not reflect what he would have earned from commission.

On top of his basic pay, he is paid monthly commission, which fluctuates based on his sales.

The employment tribunal was unable to decide if EU laws, which must be followed in the UK, require pay while on annual leave to include the commission payments that a salesperson would have earned, had the salesperson not taken the leave.

The tribunal asked the European Court of Justice (ECJ) for clarification on the relationship between holiday pay and commission.

The ECJ concluded that Mr Lock’s commission was directly linked to the work he carried out, and so must be taken into account when calculating holiday pay. Despite the fact his commission fluctuated, it was permanent enough for it to be regarded as a normal part of his salary.

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However, the ECJ left it to the UK employment tribunal to work out how the ruling should be applied in the UK.

The employment tribunal heard the case last month in light of the ECJ ruling.