The Employment Appeal Tribunal have issued a verdict on whether commission should be included when an employer calculates holiday pay.

In the case of Lock v British Gas held last year, Lock claimed that under the Working Time Regulations 1998 his pay accumulating during annual leave should be his basic salary plus a sum representing the amount of commission he would have earned had he been at work. The employment tribunal referred the case to the European Court of Justice (ECJ) which held that the working time directive, on which the UK’s regulations are based, requires commission to be included when calculating holiday pay. The employment tribunal duly inserted wording into the regulations to make them compatible with the directive, meaning that commission and similar payments must be included in holiday pay calculations.

British Gas appealed, arguing that commission and overtime are dealt with under different provisions, and should not be treated in the same way as guaranteed overtime when calculating holiday pay.

Dismissing the appeal, the Tribunal upheld the original decision to say that commission must be included when calculating holiday pay.

However, the key question in this appeal was whether the previous tribunal was right to insert wording into the Working Time Regulations 1998 to require commission and other similar payments to be included in holiday pay calculations, and British Gas may want to take this further and appeal this decision at the Court of Appeal.

Many employment tribunal claims have been delayed, waiting for this decision; and many employers may still want to hold on and wait for any further appeals and/or hearings before applying commission to holiday pay.

Alcumus will provide a full update on what this means for our clients in the next issue of our newsletter.