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Tribunal decision in Lock case gives guidance on calculation of holiday pay

26 March 2015 #Employment

In the holiday pay case of Lock v British Gas, which concerned commission payments, the European Court of Justice found that Mr Lock’s commission was intrinsically linked to his role as a salesman. Hence, his statutory holiday pay should include an amount to reflect the commission he would have earned had he not taken annual leave.

However, the Court considered that the calculation of holiday pay was a matter for national courts, hence this matter was referred back to the employment tribunal, who gave its judgment yesterday.

A key matter for consideration was whether the WTR 1998 and, in turn, the notoriously complex provisions governing the calculation of a week's pay in sections 221 to 224 of the ERA 1996, can be interpreted in line with the ECJ's decision.

The employment tribunal was found that they can and that there is no obstacle in interpreting the provisions so as to include commission payments in the calculation of holiday pay. It noted the EAT’s decision in Bear Scotland Ltd v Fulton and the other cases in relation to the inclusion of non-guaranteed overtime in the calculation and endorsed its reasoning, seeing no difference between non-guaranteed overtime and commission for the purposes of calculation of holiday pay.

The tribunal found that, as matter of interpretation,  a new regulation 16(e) Working Time Regulations should be read into regulation 16(3) of the Regulations 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."

Hence, the relevant reference period is deemed to be the last 12 working weeks such that a figure can be arrived at for the amount of pay for the number of normal working hours in a week calculated at the average hourly rate of pay in the preceding 12 week period.

This provides some welcome guidance as to the calculation of holiday pay, not dealt with in the Bear Scotland case, albeit this is only a first instance decision.

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.
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