The judgment of the Employment Appeal Tribunal in British Gas v. Lock has been promulgated today. Subject to any further appeal, it confirms that results based commission must be included in holiday pay but it does not say anything about how that calculation should be made.
The oft repeated history of how we got here is: the EU Working Time Directive required members states, amongst other things, to introduce a basic right to 4 weeks' annual holiday entitlement for workers, with pay; domestic legislation in the form of the Working Time Regulations reflected that entitlement basing the pay element on basic salary; a series of European Court judgments (superior to British court rulings at least whilst the UK remains a part of the EU) have been handed down which have said that overtime should be calculated and included as an element of holiday pay; British Gas v. Lock was concerned with results based commission where the Employment Tribunal referred a series of questions to the European Court which reverted with answers, which were then applied by the Employment Tribunal last year and in reliance on the overtime case of Bear Scotland; the result being that commission should be included in the calculation of holiday pay.
British Gas decided to appeal largely on the basis, they said, that Bear Scotland was wrongly decided or should not be taken into account, and that it is not possible for the UK's legislation (the Working Time Regulations) to be interpreted in accordance with superior European Union law by the addition of wording as suggested by the Employment Tribunal.
In short the Employment Appeal Tribunal rejected the grounds of appeal put forward by British Gas and so the Employment Tribunal's decision of last year remains good law. That means that commission has to be included in the calculation of holiday pay, and commission forgone by being on holiday has to be factored into holiday pay for the future.
This latest judgment doesn't actually change anything – results based commission must still be calculated as part of holiday pay and domestic legislation can still be read as being consistent with EU legislation albeit by adding in wording to domestic legislation.
This case was entirely a question about who pays! Had the appeal by British Gas been successful the remedy for underpaid employees would have been against the British state for a failure to implement EU legislation correctly in the Working Time Regulations. Since the appeal was unsuccessful, it remains the case that British Gas and any other employers with commission schemes must factor these into the calculation of holiday pay.
There remains a question of how best to calculate and document the incorporation of commission in holiday pay. We would be delighted to talk the options through with you.