Hi all,
Just wondered if anyone had any guidance on holiday pay. Obviously been some big tribunal cases over this. Has anyone started to include commission and overtime in holiday pay, If so, how is your organisation calculating it.
Thanks, Sarah
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Replies
Hi Sarah
Great question and one which is hard to keep up with! I have been advising clients on the point of overtime but holding fire re inclusing commission payments in holiday pay pending the appeal (see below).
I have posted where both cases are up to but others please feel free to add your thoughts!
Bear Scotland v Fulton - holiday pay: overtime
The EAT in line with previous cases on whether variable pay should be included in holiday pay, decided that non-guaranteed overtime needs to be included when calculating holiday pay, but a gap of more than three months will break a series of unlawful underpayments of holiday pay.
However this only applies in respect of the four weeks of holiday required by the Working Time Directive and they do not apply in respect of the additional 1.6 weeks' holiday provided by WTR 1998
Lock v British Gas Trading – Holiday pay: commission
The last I heard this case was referred to the CJEU which decided that holiday pay for workers who earn sales commission must reflect normal pay and cannot be limited to basic salary. When the case returned to the employment tribunal, it had to decide whether words could be added to the UK’s Working Time Regulations 1998 in order to implement the European court’s decision, and how holiday pay should be calculated.
The tribunal said that the regulations could be amended to include commission in the calculation of holiday pay for the four weeks’ leave required under European law (the UK entitlement is to 5.6 weeks’ leave altogether). It postponed its decision on reference periods for calculating holiday pay to later this year, but said that Lock should be treated as a ‘piece worker’, so his holiday pay should be an average of his actual pay including ‘commission and similar payments’. Under the regulations, a 12-week reference period is used to calculate a piece worker’s average pay, the approach suggested by the Eurpoean Advocate General in this case.
Lock however is being appealed by the employer which is likely to be heard by the EAT towards the end of 2015. The appeal will not challenge the three-month gap rule established in the Bear case, but claims dealing with other issues in the case are likely to be stayed pending the outcome of the appeal. This is why I understand from an employment lawyer who I spoke with that Tribunals are currently are only progressing cases dealing solely with overtime working and not bonuses, commission, etc.
I hope this is of use!
Regards
Sarah