The calculation of holiday pay has been in a state of flux for a number
of years now. First was the question of
overtime payments and now the Employment Appeal Tribunal (EAT) has considered
whether results based commission payments should be included in holiday pay.
The case concerned Mr Lock who worked as a salesman for British
Gas. He was paid a basic salary and further
results based commission payments which amounted to around 60% of his total
earnings. Mr Lock argued that, as he
could not earn commission when he was on holiday, he would lose money if he
took leave. The Court of Justice of the
European Union (CJEU) held in 2014 that results based commission should be included in
The question for the EAT was whether the Working Time Regulations could
be interpreted in line with this decision.
The EAT held that they could, and that results-based commission payments
should be included in holiday pay calculations. We do not yet know whether
British Gas will appeal this decision.
Unfortunately, the EAT did not address many of the important practical
issues associated with this issue; most notably, what the appropriate reference
period should be for calculating the commission element of holiday pay. The CJEU
held that the reference period should be one that is ‘considered to be
representative.’ Some have suggested that
a 12 month reference period could be used, but, as yet, we have no authority on
Whilst it is now clear that UK law requires results based commission to
be included in holiday pay, many of the practical issues remain uncertain. Employers who include commission in their
payments structure are therefore left with continued uncertainty. Some comfort
can be gained from a change to the law in 2015 which limits any claims brought
after I July 2015 to two years’ of deductions.