Employment tribunal makes important ruling on commission
Employers should include commission paid to workers when calculating holiday pay, an employment tribunal has held in Lock v British Gas Trading ET/1900503/2012.
Lock, a sales consultant with British Gas, claimed his holiday pay did not reflect what he would have earned in commission—his monthly commission fluctuated according to his sales.
The judgment follows the European Court of Justice (ECJ) ruling last year. The ECJ found a direct link between the monthly commission received by Lock and the performance of his tasks under his contract of employment. It ruled, therefore, that this commission must be taken into account by employers when making holiday payments under the European Working Time Directive (WTD), but left it to national courts to determine how this should be calculated.
Gary Henderson, Olswang partner, says the judgment means: “A week’s holiday pay for such employees must be calculated to include any commission or similar payments falling within the relevant reference period.
“The tribunal did not address what the reference period for such calculations should be, leaving this to be addressed at a further hearing. Nevertheless, the approach taken by the tribunal in adding the above wording to the WTR suggests that the reference period will be the period of 12 weeks immediately preceding the holiday (excluding any weeks where no remuneration was paid for any reason).”
ECJ principles only apply to the basic four week leave entitlement under the Directive, Henderson says. He pointed out that the Deduction from Wages (Limitation) Regulations 2014 (2014/3322) impose a two-year limit on most claims for backdated unlawful deductions from wages, where claims are presented on or after 1 July 2015.
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