Right, there it is, and still no one really any the wiser as to what to do about it. The decision of the Employment Appeal Tribunal in British Gas -v- Lock Lock v British Gas reaches the inevitable conclusion that some commissions must be included in the calculation of holiday pay, but offers no help to employers desperate to find out just how this should be done. No ruling on reference periods, no guidance on what constitutes “normal” or “regular” commission earnings for these purposes. Just the interesting little snippet that poor Mr Lock himself, a hapless pawn in the titanic struggles between workers and bosses and the UK and Europe, has now left British Gas anyway, presumably in search of a role involving fewer lawyers.
Our expectation is that British Gas will now take this decision to the Court of Appeal. Its costs of doing so would be negligible by comparison with the expense of dropping the point. Therefore, despite the fanfare around this decision and the hundreds of now substantially content-free legal seminars pre-arranged around it, we still probably won’t have settled law on the point until well into 2017.
So for employers it is the same old debate – do nothing until definitively forced to do so by new Court decision or legislation, or have a stab at agreeing something with employees or worker representatives now, and take the risk that the deal reached would not be quite as favourable one way or the other as the ultimate legal outcome. We have advised up to now that doing nothing is not without its merits. However, it is fair to acknowledge that the EAT’s decision reinforces fairly robustly the law’s direction of travel on this point, and as a result, employers are certainly a step closer than they were to having to do something.
What the EAT decision in Lock does not do is undermine the basic premise that all these cases are about the disincentive to taking necessary holidays represented by being paid less when you do. Consequently, it leaves untouched the proposition that if you do not suffer that loss, you don’t necessarily have a right to more money in respect of it. Even the fairly triumphalist UNISON press release yesterday is careful to limit the application of the case to “normal” and “regular” commission and those who are “paid less than their normal income during periods of annual leave”. This is not a finding that allowance has to be had to commissions which are abnormal or irregular.
Equally, the decision is not limited to cases where commissions make up (as they did for Mr Lock) a material part of the income. If commissions only add a few per cent to base salary levels, it appears that they would still have to be incorporated so long as they represent a regular and normal payment. Against that, commission sums making up a much bigger proportion of annual income might still properly be excluded if they were reasonably random in their timing or amount and (above all) if the employee could not show a reasonable probability that he would have earned them had he not been away.
So if you want to take the first tentative steps towards a deal with your employees on this difficult point, do some analysis first – how frequent are your commissions payments, how much do they vary over the year, are there “dead” times in your business when commissions aren’t earned whether you are in the office or not? If your employee worked that extra day or week or fortnight, what difference would it have made to his earnings, actually? Did he earn that commission when he came back, or work like mad to bag it before he left?
If you have flattish and regular commission payment patterns, you can then give up, offer a last-twelve-week average and move on to think about something else (gender pay gap reporting, anyone?). But if your commission patterns vary with the seasons, or if for any other reason you can say that the last twelve weeks’ commission earnings are not indicative of what the employee would earn at the present or near future, then nothing in the EAT’s decision in Lock prevents you holding that line with your staff for at least a little longer: prove to me that because you went on holiday you lost that commission – if you can, it’s yours, but if you can’t, it’s not for me to pay it to you anyway.