Lock v British Gas has returned to the Tribunal on the issue of commission pay whilst on holiday.
The Working Time Regulations 1998 (WTR) say that workers are entitled to a minimum amount of annual leave, during which they should be paid at a rate of a ‘week’s pay’ for each week off. The rate of a week’s pay is calculated under the Employment Rights Act 1996 (ERA). Where there are ‘normal hours’ and remuneration does not vary with the amount of work done, ERA stipulates that commission should not be included in a week’s pay.
Mr Lock worked on a commission plus basic salary basis, so could not accrue commission whilst on holiday. His case against British Gas progressed to the European Court of Justice, who held that where a worker’s remuneration includes contractual commission this should be included in his holiday pay.
The case was duly sent back to the Tribunal for a further hearing. But the Tribunal first needed to deal with the problem that what the ECJ had said was completely contrary with the wording of ERA.
The Tribunal held that this was indeed a case where the existing wording in ERA could not be interpreted to accord with what the ECJ had said. They therefore added a brand new paragraph to regulation 16(3) of the WTR as a ‘conforming interpretation’ in the following terms:
“(e) as if, in the case of the entitlement under regulation 13, a worker with normal working hours whose remuneration includes commission or similar payments shall be deemed to have remuneration which varies with the amount of work done for the purposes of section 221.”
The effect is that, where commission or similar payments are made, the averaging provisions in the ERA will apply, looking back at payments received over a period of 12 weeks before the holiday was taken.
It is now becoming much clearer how commission should be dealt with in annual leave payments.
Should you have any queries about this complicated area, speak to one of our specialist solicitors.