Newsflash: Holiday pay & commission

What do we already know?

Calculating holiday pay has been made much more complex over the past few years. The Court of Justice of the European Union (CJEU, formally  known as the ECJ), EAT and subsequent Tribunal decisions in Bear Scotland Ltd v Fulton and Lock v British Gas have indicated that payments such as commission and bonuses, should be included in holiday pay. For further detail please see our updates here.

We updated you in our October 2016 Newsflash Case update (2): Holiday pay &  commission on the Court of Appeal’s decision in British Gas Trading Ltd v Lock and another [2016], available here.

The Court upheld the EAT’s decision that that sums earned by way of commission should be included in the calculation of holiday pay for the first four weeks of an employee’s holiday under Regulation 13 of the Working Time Regulations 1998 (WTR) and the WTR should be interpreted to conform with the requirements of EU law.

We also updated you that British Gas had appealed to the Supreme Court.

What’s new?

The Supreme Court has refused British Gas permission to appeal.

Therefore the Court of Appeal’s decision stands and commission should be included in the calculation of holiday pay for the first 4 weeks of holiday under the WTR.

However, unfortunately the refusal of British Gas’s appeal means that there are no further answers as to precisely how commission (and other elements of remuneration) should be included in the holiday pay calculation.  Although the Court of Appeal approved the Tribunal’s decision in Lock v British Gas to imply a 12 week reference period over which earnings should be averaged in order to calculate holiday pay, the Court of Appeal did not comment on whether this was the correct reference period in all cases.

What now?

Given the certain obligation to pay commission as part of holiday, but the uncertainty as to how to approach this, it has never been more important for employers to audit their holiday pay arrangements, identify areas of risk, and plan how to address these.

Before taking action we would encourage you to seek advice from our Menzies Law team on 0117 325 0526.