Holiday pay and commission: Lock case outcome may not be known until March 2015
Published 15 October 2014
As readers will remember, 60% of Mr Lock's pay as an energy salesman was based on commission. He was paid monthly in arrears several weeks or months after a sale. When he was on holiday he received his basic pay together with commission earned on past sales, but he was not paid anything to compensate him for commission that he would have generated had he not been on holiday. Mr Lock brought a tribunal claim for outstanding holiday pay which has been to the Court of Justice of the European Union (CJEU). The case is now back in the Leicester employment tribunal. The CJEU said, in summary, that commission must be taken into account in holiday pay, but that the method of calculation was for the national courts to decide. The Leicester employment tribunal have listed an initial hearing for 20 – 21 October. Further dates have been set down for 23-26 March 2015 which will look at the practical issues including the reference period for commission payments and how far they should go back to, and whether this applies to the minimum 4 weeks' leave under European law or the 5.6 weeks' provided for under the UK Working Time Regulations 1998.
What this means for employers:
It is unfortunate that this matter is taking so long to resolve. In the meantime employers who pay commission need to consider their options including waiting to see what the outcome of this case is and accepting that, while waiting, they may be accruing more of a liability. Another option is to quietly change holiday pay calculations in the hope of breaking the chain of liability. There is also the costly option of making good any back payments. Most of our clients are taking a wait and see approach. We are also awaiting the EAT's decision on the joined cases concerning overtime and holiday pay calculations. This decision is likely to come out in November.