26th February 2016
Commission payments must be included in holiday pay calculations according to a decision of the Employment Appeal Tribunal (EAT) handed down on 22 February. The EAT followed the decision in Bear Scotland v Fulton (another EAT decision confirming that overtime must be included in holiday pay). Employers who operate commission schemes should review their potential exposure to claims if they do not include commission in the calculation of holiday pay. However, British Gas may appeal against this decision, so watch this space!
Mr Lock was employed by British Gas as a salesman. He received a salary, but the bulk of his pay came from his commission on customer sales. When he took periods of annual leave he would received his salary only. British Gas did not include Mr Lock’s commission payments when calculating his holiday pay. He challenged this in the Employment Tribunal arguing that British Gas were in breach of the Working Time Regulations 1998 (WTR) and European law. For more detail please see our business insight ‘Commission and holiday pay update: Lock v British Gas decision is to be appealed’.
The EAT held that Mr Lock should receive his ‘normal pay’ during holiday periods and that this included his commission. The EAT reached this decision by holding that the wording of the UK legislation could be read in such a way as to comply with European law.
If you have any queries about the decision or would like to discuss your holiday pay arrangements please contact David Smedley or Andrew Rayment.