Holiday Commission Payments – The Verdict

Finally we have the decision about the calculation of commission payments.

This well publicised case was brought by Mr Lock, an employee of British Gas. He was paid a basic salary and commission based on the sales he made which represented, on average, over 60% of his take home pay.

British Gas paid holiday pay to Mr Lock based on his basic salary only, plus commission on sales he had earned prior to the holiday period. This resulted, in the weeks and months after the period of leave, in times when Mr Lock only received basic salary and not commission. This was because Mr Lock was not at work during the period of leave, did not make sales and did not generate any commission.

Mr Lock brought a claim against British Gas contending that his holiday pay should be based on basic salary and average commission.

The employment tribunal asked the European Court of Justice (ECJ) whether employers should include commission when calculating holiday pay and both decided that Mr Lock should be paid holiday pay including overtime. Since the ECJ we have been awaiting for the employment tribunal to see how to give effect to the ECJ decision.

At the hearing Leicester employment tribunal made it clear that the case was not about whether the commission received by Mr Lock should be included because the ECJ had already decided that it should. The case was about whether the Working Time Regulations could be interpreted to give effect to the ECJ decision.

The employment tribunal concluded that it could by adding wording to the Working Time Regulations which requires employers with workers who have normal working hours but who receive commission or similar payments to calculate holiday pay as if their pay varied with the amount of work done. The effect is to require employers to calculate holiday pay based on an average of the previous 12 weeks’ pay.

The Next Steps

Not all commission payments will qualify and have to be taken into account. You should reconsider how you calculate holiday pay if you operate a similar commission scheme, as you may face a claim for back pay. Legislation was introduced to limit the impact of such claims by restricting back pay for two years for cases on or after 1 July 2015.

This decision relates only to the calculation of four week’s holiday and not the entire current statutory minimum of 5.6 weeks or any enhanced holiday. You should also check any contractual provisions. If you need any help calculating holiday pay for your employees, call us on 0118 940 3032 or click here to email us.

Question: Christmas is coming – Are Employees Who Work on Bank Holidays Entitled To Pay in Lieu or Additional Holidays?

Answer: This depends on the overall holiday entitlement and the terms of the employment contract. If the entitlement is the statutory minimum (which is 28 days including Bank Holidays) and an employee works on a Bank Holiday, they must have a day off in lieu so that the total paid leave stays at 28 days per year. This is for employees who work five days per week.

What about pay? If an employee is entitled to the day off on a Bank Holiday, then they will be entitled to their normal rate of pay for this, in the same way as they would for any other holiday. Contrary to popular belief, for those working on a Bank Holiday, there is no entitlement to extra pay, unless the terms of the person?s contract state otherwise. However, if employees are normally paid extra for working a Bank Holiday that should apply when additional public holiday days are announced too.

How about part-time employees?

Your obligation to part-time workers is governed by the Part-time Workers (Prevention of Less Favorable Treatment) Regulations 2000. This means that part-time workers are entitled to the same holidays as comparable full-time workers, but on a pro rata basis.

You must make sure that a part-time employee receives his or her pro rated entitlement if bank holidays are included in the employee’s statutory minimum holiday entitlement, or if you grant holiday that exceeds the statutory minimum to your full-time workers.

Because most bank holidays fall on a Monday or Friday, part-time employees who do not work on these days could be entitled to proportionately fewer days off compared with full-time employees.

To avoid a complaint of less favorable many employers provide part-time employees with a pro rated bank holiday entitlement. Te best option is to calculate pro rated bank holiday entitlement according to the number of hours that the part-time employee works, irrespective of whether or not he or she works on the days on which bank holidays fall.

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