Background

Mr Lock worked as a Salesman for British Gas. In addition to his basic contractual pay, he also received commission for sales. When Mr Lock took annual leave he was paid only his basic rate as he was not generating any sales during the time when he was not in work and therefore, could not accrue commission. Mr Lock argued that his holiday pay should reflect his ‘usual’ earnings, which included commission.The Employment Tribunal (ET) referred the matter to the Court of Justice of the European Union (CJEU) asking whether the UK was required to reflect commission in its rules for calculating holiday pay. The CJEU ruled that employees should indeed have commission included within their holiday pay, however, they did not give a clear indication of how this would be achieved and sent it back to the ET to clarify.

ET’s Decision
The ET have published their Judgment in relation to whether the Courts can re-write UK rules on holiday pay in order to comply with EU law and it appears as though they have formed a similar decision to that reached by the EAT in Bear Scotland (where it was ruled that holiday pay should include overtime) as they have confirmed that UK rules can be re-written to ensure that commission is included within holiday pay.

The ET ruled that for the purposes of the UK rules calculating holiday pay, Mr Lock should be treated as a ‘piece worker’, which would cause his holiday pay to be calculated in accordance with his normal working hours at his average hourly rate, including commission, as opposed to at his basic rate.

The ET have deferred the issue of what the correct reference period (currently 12 weeks for piece workers) for calculating average commission would be, whether any money is owing to Mr Lock and if so, how much, to a later date.

Where does this leave us?
Whilst there has been a decision, unfortunately, it does not assist in implementing the ruling in practice as the ET are yet to look at whether the calculation may differ for shift workers or employees who do not have normal working hours; what would happen if a 12 week reference period is not a fair representation of what an employee would normally earn; and whether all commission schemes are included.

As it stands, unless there is a commission scheme already in place that compensates for holidays, companies should be including commission within holiday pay.

Mr Lock’s case is continuing in the ET and decisions on these outstanding points are eagerly anticipated.

Comments
Justine Watkinson, Head of the Employment Department at Hillyer McKeown LLP states: “It was not entirely surprising that the Judgment went this way given the trend of European case law recently where there is a real desire from the European perspective that employees are properly remunerated whilst on holiday, regardless of the impact it may have on the cost to a business.

Whilst there is no current case law in respect to voluntary overtime, I also anticipate there will be a similar ruling in the near future given the current trends.”

If you require any advice on this or any other employment-related matters please contact Justine Watkinson at [email protected] or 01244 616609.