Employees entitled to have commission included in holiday pay

The Employment Appeal Tribunal has confirmed that employees are entitled to have commission earnings added to their holiday pay.

The decision is the latest round in a long running case involving British Gas and one of its salesmen, Mr Joe Lock. Mr Lock earned a basic wage plus commission. However, when he took holidays, he was only paid at the basic rate, with no element of commission.

He challenged this in 2012. The Employment Tribunal referred the case to the Court of Justice of the European Union (CJEU). It ruled that his commission was “intrinsically linked” to his work and should be included in his holiday pay.

It returned the case back to the tribunal to determine how the ruling could be incorporated into British law under the Working Time Regulations (WTR).

Last year, the tribunal held that the European Court’s ruling was compatible with the WTR and so commission should be included in holiday pay. The Employment Appeal Tribunal has now upheld that decision.

The rulings mean that companies will now have include commission in holiday pay. They may also face claims for back pay; although the Deduction from Wages (Limitation) Regulations mean that any claims will be limited to two years.

Employers should also note that the ruling on commission only relates to the four week holiday entitlement under European law; it doesn’t include the extra 1.6 weeks available under UK law.

The situation is still uncertain, however, as British Gas has sought permission to take the case to the Court of Appeal. We shall keep clients informed of developments.

Please contact John Carter if you would like more information about the issues raised in this article or any aspect of employment law.