Commission: Another step in the holiday pay story - DAC Beachcroft

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Commission: Another step in the holiday pay story

Published 26 March 2015

In Lock v British Gas an Employment Tribunal has decided that commission should be included in the first 4 weeks holiday pay required by the Working Time Regulations (WTR).  In doing so the Tribunal has been guided by the decisions of the Court of Justice of the European Union (CJEU) (which heard this case last year) and Bear Scotland (which we have previously covered). 

The decision

In summary the Tribunal ruled that:

  • The employer must take into account commission payments when calculating pay for the four week holiday entitlement under regulation 13 of the WTR but not the extra 1.6 weeks under regulation 13A.
  • UK domestic law can be interpreted so as to bring it into line with CJEU’s ruling and that, therefore, employers must bring commission payments into account when calculating holiday pay in respect of the four week entitlement under regulation 13 of the WTR. There will be further hearings in due course to deal with other issues, including how commission paid should be taken into account;
  • It could achieve this outcome by inserting new words into regulation 16(3) of the Working Time Regulations 1998 as follows:-
    "(e) as if, in the case of the entitlement under regulation 13, a worker with normal working hours whose remuneration includes commission or similar payment shall be deemed to have remuneration which varies with the amount of work done for the purpose of section 221."

What this means for employers

This decision is not binding on courts and other Employment Tribunals.  However, it reflects the way the judicial wind is blowing. The lawyers acting for British Gas are saying it is possible that this decision will be appealed. That appeal could take some time to be heard.  It could be followed by a further hearing and appeal given three important questions were parked by the Tribunal for a later hearing.  In our view, until there is a binding decision it is open to employers to "wait and see" on commission or proactively include it in the first four weeks of holiday pay. With the strict time limits set out in Bear Scotland and the new regulations capping backdating of claims to two years coming in on 1 July 2015 employers may well decide to wait and see.


Nick Chronias

Nick Chronias

London - Walbrook

+44 (0)20 7894 6701

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