The Employment Appeal Tribunal (EAT) has held that sums earned by way of commission should be included in the calculation of holiday pay for the first 4 weeks of an employee's holiday under Regulation 13 of the Working Time Regulations 1998 (WTR). It found that there was no reason why UK domestic legislation could not be interpreted in such a way so as to give effect to the European Directive.

What does this mean for employers?

This does not change the general view that the first 4 weeks of annual leave under the WTR should include a sum for commission earnings. Nor does this decision take us any further forward on whether payments such as those for voluntary overtime or bonuses have to be included in the first 4 weeks' WTR holiday pay.

We still await practical guidance, which may come from the Employment Tribunal's decision on Mr Lock's remedy, on the reference period that employers can use to calculate holiday pay and what payments can be offset against the holiday pay due, if any.

Progress may not be fast, however. British Gas has asked for permission to appeal to the Court of Appeal. Any such appeal is unlikely to be heard until 2017, and would be expected to take place before the Tribunal issues its remedy decision.

In the meantime, and as set out in our previous alert (Here), it is open to employers to 'wait and see' before implementing their own revised holiday pay calculations.

The EAT decision

The EAT judgment follows the decision of the Leicester Employment Tribunal in 2015. The judgment itself is not a surprise, although it is confined to a narrow element of the overall picture. Further appeals to the Court of Appeal, and/or the Employment Tribunal's decision on holiday pay calculation and reference periods, are likely to provide more practical guidance for employers on this issue.

  • The EAT held that it was possible for UK domestic legislation to be interpreted in order to give effect to the European Directive. In doing so, the EAT followed its earlier decision in Bear Scotland & Others v Fulton, and said that the decision in Bear Scotland was not manifestly wrong.
  • The EAT confirmed that the same approach to the WTR should be taken for cases involving both commission (such as Lock) and non-guaranteed overtime (Bear Scotland). There was no basis on which to distinguish Bear Scotland in this case.
  • The EAT held that if Bear Scotland was incorrectly decided, it was for the Court of Appeal, and not the EAT, to say so.